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Oil markets are growing increasingly…
The United States Treasury Department will grant oil product cargo from a grace period when it goes into effect next year, Reuters said on Thursday.
The price cap on Russian crude oil shipments went into effect on December 5, but the price cap on Russian petroleum products such as gasoline and diesel won’t go into effect until February 5. But now, the United States said there would be a grace period for those shipments in order to provide time for them to arrive at their destination before running afoul of sanctions.
For Russian oil product shipments, as long as they are loaded before February 5 and unloaded at its declared destination port before April 1, they will not be subject to the price cap.
Russia, of course, has stated its refusal to follow along with the price cap—with Vladimir Putin even threatening to cut crude oil production if it had to.
The oil price cap was designed to restrict Russia’s crude oil revenues while maintaining the flow to international markets. But the price cap has received a lot of criticism despite its well-supported goals, with detractors claiming that such a cap would be ineffective—particularly if Russia makes good on its threat to refuse to ship crude oil or products to any country that attempts to force the price cap.
The problems with the price cap go beyond Russia’s threats. For the first two weeks of the crude oil price cap, crude oil tankers traveling through the Bosphorus and Dardanelles Straits were held up when Turkey demanded proof of full insurance for the cargo.
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.
The risk is clear, the western insurance will lose customers. That means that their ability to globally secure as they get less income may make them defaut.