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Oil prices weaken amid China’s surging COVID cases, Russian oil cap

Yahoo Finance’s Ines Ferré discusses the latest movements in energy markets.

Video transcript

[AUDIO LOGO]

RACHELLE AKUFFO: All right, China reporting a record number of new daily COVID-19 infections for a second consecutive day. The consequent lockdowns now weighing heavily on global oil demand. Yahoo Finance's Ines Ferré has the latest. Ines.

INES FERRE: Rachelle, and looking at oil right now, we're watching WTI down 1 and 1/2%. Brent crude also lower, as we look at our YFi Interactive board. The oil markets have been weaker in November. You had Brent crude this week that touched its cheapest level since January after that headline that was later refuted by Saudi Arabia about oil production increases, perhaps at the next OPEC Plus meeting.

Look, the COVID lockdowns, those are having quite a bit of impact over concerns about demand going forward in China. Also, the Group of Seven headlines coming out of there to cap Russian oil prices. And that cap could be higher than what the market had been expecting, perhaps not having too much of an impact on Russian coffers and being a price that was similar to what Asia pays for Russian oil. We want to also note that you've got the European sanctions that are coming up on December 5, so Brent and WTI futures headed for their-- for a third weekly drop.

But what does this all mean for gas prices? Well, we've got the gas price of retail gasoline, the average that AAA has for you, on a full screen, $3.58 a gallon. That's better than the $5-plus that we were seeing in June over the summer of this year. It's still $0.18 higher than a year ago.

What does this all mean going into next year? Well, if you take a look at the US Energy Information Administration, that agency's forecast for 2023, they're expecting gasoline prices to hit around $300-- $3-- excuse me-- and $0.60 per gallon in February of 2023. And they're expecting gasoline prices to remain relatively flat in 2023, guys.

AKIKO FUJITA: Ines, you mentioned the sanctions over on the EU on oil, specifically Russian oil. But you've also got this big debate that's playing out over a price cap on natural gas, with many of the EU countries simply not on the same page right now. What does that mean in terms of where nat gas is likely to move?

INES FERRE: Yeah, and if we just take a look at what-- well, this is natural gas here in the US. That's down 4%. But nevertheless, yes, you're right. That has been a debate about capping natural gas prices. And the cap that had been considered before was going to be relatively high to where natural gas prices are right now in Europe.

But still, you don't have consensus over that. There's, right now, no consensus over the G7, price caps on Russian oil. So quite a lot of question marks when it comes to energy as a whole in Europe.

AKIKO FUJITA: Yeah, a lot of uncertainty going into year-end. Ines Ferré, thanks so much for that.