Russia’s flagship crude grade Urals currently trades at around $52 per barrel, more than $10 a barrel lower than the low end of a proposed G7-EU-UK price cap of $65-$70 per Russian barrel of crude, according to Bloomberg.
No final decision has been taken by the G7 and the EU yet, but the price cap mechanism and the EU embargo on imports of Russian crude by sea are set to enter into force in less than two weeks, on December 5.
Reports emerged on Wednesday that the EU is discussing capping the price of Russian oil at somewhere between $65 and $70 per barrel. Such a cap, if approved, would not effectively lower the price of the flagship Russian crude currently being traded on the market.
The EU ambassadors of the 27-member bloc were discussing the G7 proposal of a cap this week but failed to reach a decision on Thursday as EU countries are split over whether a price cap of $65-$70 is too high or too low.
A $65-$70 per barrel price cap for Russia’s oil is not expected to immediately shrink Putin’s oil revenues, considering that this is more or less the price that buyers currently pay for Russian crude, multiple industry sources familiar with the transaction prices told Reuters on Thursday.
Wood Mackenzie’s vice president of gas and LNG research, Massimo Di Odoardo, told CNBC on Friday, “Those levels of discounts are certainly in line with what the discounts already are in the market.”
“It’s something that doesn’t seem, as it is placed, like it’s going to have any effect [on Moscow] whatsoever if the price is so high,” Di Odoardo added.
By Charles Kennedy for Oilprice.com