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The price cap on Russian crude oil is working and will remain at $60 per barrel for now, the European Commission told the EU member states this week, Bloomberg reported on Friday, citing sources with knowledge of the matter.
The EU banned from December 5 maritime transportation services from shipping Russia’s crude oil to third countries if the oil is bought above the price cap of $60 per barrel, and imposed an embargo on seaborne imports of Russian oil into the EU.
The EU believes that the price cap is working in its dual purpose to reduce oil revenues for Putin and at the same time keep global markets sufficiently supplied, the Commission told the EU’s 27 member states this week, basing its analysis on the latest reports and estimates from the International Energy Agency (IEA).
Russian oil revenues “are already dwindling,” the IEA said in its Oil Market Report for March. In February, Russia’s estimated oil export revenues fell to $11.6 billion. This was down by $2.7 billion from January when volumes were significantly higher, and nearly half pre-war levels.
“Russian fiscal receipts from oil sales were up 22% from January after export taxation rules were adjusted, but at $6.9 bn, just 45% of the level from a year earlier, according to the Russian finance ministry,” the IEA said.
Earlier this month, U.S. Energy Envoy Amos Hochstein said that the price cap on Russia’s crude oil and oil products was working well.
“I think the beauty of the process is that it is working and that Russian oil and Russian products are being traded below the price cap,” Hochstein said on the sidelines of the CERAWeek energy conference in Houston, as carried by Reuters.
Recent estimates have also shown that Russia continues to rely on Western insurance for more than half of the oil cargoes it sells, which could give leverage to the West if it decides to toughen the sanctions against Moscow.
According to Bloomberg’s report, there will not be a change in the price cap for the time being, despite a push from some EU member states, such as Estonia and Poland, for lowering the price cap.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Moreover, if Russian oil revenues are falling as claimed by the IEA, then the same applies to OPEC+ and all other oil producers around the world. This has nothing to do with the dead price cap and everything to do with banking crisis which as always started in the United States. Still, the IEA claims are not only untrustworthy but also false and politically-motivated. That is why OPEC+ dropped the IEA as a source of energy data two years ago.
Furthermore, the claim by Finland-based Centre for Research on Energy and Clean Air (CREA) that Russia continues to rely on Western insurance for more than half of the oil cargoes it sells is a plain lie. If this is the case, then what is the role of the Hundreds of Ghost tankers which Western media claimed that Russia has chartered? So either Western media is lying or the claim by CREA is a lie.
The proofs are:
1- Russian oil companies aren't allowed by law to sell Russian crude below the cap price of $60 a barrel.
2- US researchers from the International Finance Institute at Columbia University and California University found that Russia has been selling its crude at $74 which is 23% higher than the cap price.
3- Almost all Russian crude oil is sold to China, India and Asian countries and oil traders which provide their own insurance so they neither need Western shipping or insurance.
4- Russia has a very big fleet of oil tankers to carry its crude exports to all corners of the world. It can also avail itself to tankers from friendly countries like China, India and Iran if needed.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert