According to dpa, a price cap of $100 per barrel is planned.
(Photo: IMAGO/Panthermedia)
Brussels The G7 industrialized countries and the EU have introduced an embargo and a price cap for Russian oil products. A corresponding decision from Friday came into force on Sunday.
The recent sanctions against the Russian oil sector impose two price caps on Russian refinery products: $100 per barrel (about 159 liters) for diesel, kerosene and oil products, which are usually traded on the world market at a premium to the price of crude oil. For comparison: On international exchanges, a barrel of diesel for delivery to Europe recently cost around 117 dollars per barrel.
Lower-value petrochemicals such as heating oil or naphtha, which are usually traded at a discount to the price of crude oil, can be shipped at a maximum price of $45 per barrel. The prices apply to exports of Russian refined products to countries outside the G7 industrialized countries. A complete embargo applies to exports to the G7 countries.
With the combination of an import embargo and a price cap for exports to third countries The EU wants to further cut Russia’s sources of funding for the war in Ukraine without throwing energy markets into chaos. In early December, the EU, the G7 and Australia followed the same pattern imposed a $60 cap on Russian crude oil. However, there are some exceptions, for example for Hungary.
Proven mix of embargo and price limit
In order to enforce the price cap, it should be regulated that in future services important for the export of Russian oil products may only be provided with impunity if the price of the exported oil does not exceed the price cap.
Western shipping companies could use their ships to continue transporting Russian oil products to third countries such as India. The regulation should also apply to other important services such as insurance, technical assistance and financing and brokerage services.
According to a senior EU official, the mix of embargo and price cap has worked to weaken Russia’s oil industry. “The past few weeks have shown that the measures are working,” said the EU official. Russia must sell its oil at large discounts.
According to the analysis house Argus Media, Russia recently received only half of the world market price of around 85 dollars per barrel for its Urals crude oil. “This sophisticated system has proven to be very efficient operationally,” the EU official continued. The According to estimates by the International Energy Agency, crude oil price limits in third countries have cost Russia a total of eight billion euros.
Analysts expect higher prices
In the case of crude oil, the G7 countries have succeeded prevent new price jumps on the international markets and at the same time ensure that Russia can no longer fill its war chest. However, analysts had expressed doubts that this would also be so easy to implement with diesel, kerosene and heating oil. Ehsan Khoman, chief analyst for commodity markets at Bank MUFG, said: “The embargo on Russian oil products is likely to have a bigger impact on world markets than the crude oil ban in December.”
The logistics are more demanding, and more smaller ships are needed. Khoman said: “We believe that the market underestimates Russia’s embargo on petroleum products. That can drive up energy prices.” These concerns are also known to the EU Commission. In Commission circles it is said that for this reason an upper price limit for diesel had to be chosen that was relatively close to the world market price.
In addition, the EU is giving traders a comparatively long transition period: Ships that were loaded before February 5 and took oil products on board at prices above the upper limit have 55 days to deliver their cargo. This ensures that ongoing trade is not disrupted.
However, the upper price limits for crude oil and crude oil products are not set in stone forever, according to EU circles. In future, the EU and the other G7 countries will reassess the markets every two months and – if necessary – adjust the upper price limits. This is to ensure that Russia will have to offer its energy exports at discounts on the world market even if oil prices fall below current limits.
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