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EU Discusses $65-70 Price Cap On Russian Oil

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The European Union is now discussing limiting Russian oil prices to a range of $65 to $70 a barrel, an EU diplomat said. Reuters Even if approved, it would not effectively reduce the price of the mainstay Russian crude currently traded in the market.

EU ambassadors for the bloc of 27 member states are considering a proposal for a price cap, promoted by the G7 and Australia, aimed at limiting Vladimir Putin’s oil revenues. The G7, UK and EU will ban seaborne shipping services for Russian oil from 5 December unless the oil is purchased below a certain price cap.

The EU is expected to discuss the price cap mechanism today and may make a decision and announce it by the end of Wednesday.

“The G7 is apparently looking at bandwidth between $65 and $70 per barrel,” an EU diplomat told Reuters.

Such a price cap is about the level at which the Russian Urals are currently traded.per data from StatistaUrals traded at $23 a barrel last weekend, below international benchmark Brent crude.

The United States and the G7 have said they would consider caps that would not fall below Russian production costs to keep Russian oil flowing into the market. But the $65 to $70 cap as of Wednesday’s oil trade is not a hard cap, given that Brent crude is trading at $85 a barrel as of 7am ET.

After reports emerged that Russia’s oil cap had been raised from $65 to $70, oil prices actually gave up on previous gains and fell more than 2%.

As of 7am ET, Brent had fallen 3% to $85.65 and US benchmark WTI crude fell below $80 a barrel again to $78.70. Earlier this week, WTI crude fell to $75 a barrel, the lowest level since January this year before Russia’s invasion of Ukraine.

By Tsvetana Paraskova for Oilprice.com

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