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G7 will maintain its price cap on Russian crude oil at $60 per barrel, Reuters has reported, citing an official from the group, which partnered with the European Union on the cap.
The decision comes despite rising oil prices that have narrowed the discount between Brent and Russian crude, bringing it closer to the cap, and also despite calls from some EU members and Ukraine for a lower cap.
The price caps, agreed upon last year and coordinated with an EU Russian oil and product import embargo, have prompted various reactions. According to its authors, the cap is working. Axios reported recently that Russia’s oil export revenues have plunged by nearly 50% from highs of over $20 billion.
According to others, however, Russian oil frequently sells for more than $60 per barrel. The FT reported last month that the price, at which Russian companies sell oil abroad “often exceed the G7-imposed price cap on the country’s exports.”
There have also been concerns about the enforcement of the price cap, largely left at the discretion of Western insurance and ship owners. This significant new responsibility prompted many of them to outright refuse to contract Russian cargoes, regardless of price, which in turn led to an increase in the so-called shadow fleet that carries Russian oil and fuels around the world.
Meanwhile, the International Energy Agency reported that Russia’s oil and oil product exports last month had hit the highest since April 2020, an increase of 600,000 bpd. Revenues, however, were 43% lower than a year ago.
Oil product exports specifically rose by more than 17% in March, Reuters reported earlier this month, despite the full embargo on such exports to the European Union.
Russia itself said recently it had managed to reroute all of its oil exports to what it calls friendly countries, following the barrage of Western sanctions in the wake of Moscow’s invasion of Ukraine.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
The proofs are that Russian exports of crude and petroleum products broke records twice in January 2023 when they hit 8.2 million barrels a day (mbd) or 2.5% higher than pre-Ukraine levels and again in in March 2023 when they rose to 8.1 mbd with crude exports hitting 5.0 mbd and petroleum exports amounting to 3.1 mbd despite a production cut of 700,000 barrels a day (b/d).
And contrary to Western media claims, Russia’s oil revenues have been on the rise all through. During 2022 exports benefited from high prices and in 2023 from lower discounts and higher volumes and also relatively high prices (though lower than in 2022).
Moreover, Russia has been highly successful in finding new markets for its entire energy exports with the bulk of its crude going to the Asia-Pacific region and its petroleum products going to Africa, the Middle East and Latin America.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert