The European Union will have its regulations in order before the Russian crude oil price cap and ban goes into effect, the EU’s energy commission told Reuters on Friday. Although the G7 price cap has yet to be quantified.
The G7 plan to cap the price of Russian crude oil goes into effect on December 5, and the EU will ban Russian crude oil imports from the same date. The EU will also ban the import of Russian crude oil products starting on February 5.
The US-led price capping mechanism of the G7 and the outright ban from the EU has the potential to disrupt 2.5 million bpd of seaborne crude oil to Europe. The February ban on crude oil products will also have an unsettling effect on the already-tight diesel market.
The G7 has yet to come up with its maximum price allowed under the cap, and EU regulations necessary to navigate the post-December 5 oil markets have yet to be crafted and finalized.
“Our sanctions will cover crude for EU member states so we will not buy Russian crude oil starting from December 5 and we covered the possible oil price gap for international buyers with our eighth package of sanctions,” EU energy commissioner Kadri Simson said, adding that the overall framework was in place.
But the EU needs the G7 to decide on the price cap level. According to an anonymous U.S. State Department official who spoke to Reuters, the United States intends to issue guidance in the coming days on the oil price cap. It is also ready for “hiccups” as it implements the plan.
“The aim is of course to have finalised an agreement with the G7 before the 5th Dec,” the U.S. official said, who added that they were “aware that there’s not much time left.”
“I expect you’ll hear something within the next week.”
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.