It's time to review the price cap on Russian crude oil, Ukraine's foreign minister said on Thursday because the current market price of Urals is below the cap.
A coalition made up of the G7 countries as well as Australia and the EU set last year a price cap on all seaborne Russian crude oil. The goal was to reduce Russia's oil revenue that it could funnel into its war with Ukraine.
Russia, however, said it would not play along with the measure and said it would refuse to sell oil to anyone attempting to enforce the price cap. Further, the Kremlin recently said that it had yet to see any cases of price caps on its oil.
And therein lies Ukraine's problem with the price cap, if that is indeed true.
Russia's Urals crude oil grade for delivery to Europe was trading at $54.43 on Wednesday-coming comfortably under the established price cap.
"Ukraine is confident it's time to review the oil price cap given the current market price on Urals is lower than $50 USD per barrel. This decision should ensure a drastic reduction in Russia's income to finance the war, mass atrocities, and destabilization in Europe and elsewhere." Ukraine's foreign minister tweeted Thursday afternoon.
The coalition is set to soon implement another price cap-this time, on Russia's petroleum products. The new cap will go into effect on February 5, although the plan has been criticized for its complex nature, including the dual cap-one for crude products that trade at a premium to crude oil, and another that trade at a discount.
The Biden Administration is likely to oppose lowering the current crude oil price cap on Russian crude oil, Bloomberg sources said on Thursday.
By Julianne Geiger for Oilprice.com
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Long $bp British Petroleum strong buy.