Russia’s Urals Oil Breaches $60 Price Cap For The First Time

Russia’s flagship crude grade, which has been trading consistently below the price cap set by the G7 and the European Union, climbed above $60 per barrel on Wednesday.

That’s supported by Argus Media data, cited by Bloomberg. 

It is now, for the first time, that observers can judge if the price cap is actually working. Before, with Urals trading below it anyway, it could hardly be argued that the cap was doing anything to deliberately squeeze Russia’s oil export income.

In fact, because another Russian grade, ESPO, has been consistently trading above the price cap, it could be argued that the cap was not the most effective of tools, mostly creating a headache for Western insurers and shipowners.

But now that Urals has jumped above the cap, even temporarily, things could get interesting—and unpleasant for buyers.

According to energy analyst Vandana Hari from Vanda Insights, when it comes to India “It’s problematic.”

“Indian banks have been extra cautious in the last few months for fear of sanctions, requiring the refiners to show that the free-on-board price of their cargo was below $60 in order to put the payment through,” Hari told Bloomberg.

If Urals jumps above $60 again, it means Russia and its oil buyers would have to increase the use of non-Western insurers and tanker operators to avoid punitive action from the G7 and the EU.  

“We are monitoring the market closely for potential violations of the price cap,” the U.S. Treasury said in a statement cited by Bloomberg.

“It is worth noting that trades above $60 that do not use Coalition services are not in violation of the price cap and a substantial proportion of Russian oil trades, though, still use Coalition service providers.”

By Irina Slav for Oilprice.com

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