Home Business U.S., Allies Eye $60 Price Cap For Russian Crude

U.S., Allies Eye $60 Price Cap For Russian Crude

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The United States and its allies want to establish a price level that caps Russian oil prices, people familiar with the talks told The Wall Street Journal on Tuesday.

Officials are talking about capping Russian oil prices to $60 a barrel. The group will meet on Wednesday to try to reach some agreement on prices.

The G7 plan to cap Russia’s crude oil prices will come into effect on December 5, and the EU will ban Russian crude oil imports from the same date.

The US-led G7 price capping mechanism and outright ban from the EU could disrupt more than 2.5 million bpd of seaborne crude to Europe. Russia this week reaffirmed its threat not to supply oil to countries operating under the cap, redirecting its oil to “market-oriented partners.” According to Russian Deputy Prime Minister Alexander Novak, Russia could even reduce production in response to a price cap strategy.

Last week, the G7 scrambled ahead of the looming 5 December deadline. The EU regulations needed to navigate the post-5 December oil market were not yet drafted or finalized until the actual price levels were determined.

A price cap plan allows all buyers in the group to buy crude oil from Russia only if they can buy below a set minimum price. The plan aims to limit Russian oil revenues while allowing crude oil customers to source oil from Russia.

A cap of $60 would be close to $30 a barrel under current Brent barrel prices, a significant discount for oil buyers.

Oilprice.com by Julianne Geiger

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