Sun, May 28, 2023

Russian Oil Cap Will Work

Oil prices rose

A price cap on Russian seaborne oil, according to EU ministers, would be effective despite efforts by the Kremlin to evade sanctions and widespread market skepticism of the proposal.

In a coordinated effort to reduce Moscow’s ability to finance its conflict in Ukraine, the EU, the G-7, and Australia decided to cap Russian oil purchases at $60 per barrel on Friday. On Monday, the price cap went into effect. The regulation states that Russian oil will have a price of $60 per barrel or less with the required insurance approval. Most insurance companies have headquarters in G-7 countries.

To maintain its oil revenue, Russia will not sell oil to countries that adhere to the cap and is ready to reduce production.

According to reports, it has built a fleet of about 100 ships to get around oil sanctions. The Kremlin could sell its oil without insurance from the G-7 or other countries if it had its so-called “shadow fleet.”

The involvement of China and India in implementing this price cap is one of the major unanswered questions.

Both nations increased their purchases of Russian oil in the wake of the invasion of Ukraine and are reluctant to accept the cap. The petroleum minister of India reportedly said on Monday that he “does not fear” the cap and believes the policy will have only minor effects.

Early in 2023, g7 will review the cap’s level. The goal of this revision should lower the price of Russian oil by “at least 5%.”

According to European Commission President Ursula von der Leyen, the cap on oil prices will help the bloc stabilize energy prices. Due to the Russian government’s involvement in the conflict in Ukraine, the EU had to abruptly reduce its reliance on Russian hydrocarbons.

There is a chance that countries will purchase Russian oil at the agreed-upon cap but then resell it to Europe, for instance, at a higher price.

West Texas Intermediate futures and Brent crude, the benchmark for international crude prices, traded 0.4% higher at about $83 per barrel and $77 per barrel, respectively.

Following OPEC+ nations’ decision to maintain output targets, crude futures traded higher on Monday morning but declined in afternoon trading.

energy, Wibest – Natural Gas Production: Gas pipelines and storage containers.

Gazprom Faces New Damages

With German energy provider RWE announcing it will submit a claim after the Russian gas giant reduced and stopped natural gas deliveries to Germany earlier this year, Russia’s Gazprom is now facing additional arbitration proceedings.

In response to the lack of gas deliveries, compatriot Uniper filed a lawsuit against Gazprom’s wholly-owned gas export subsidiary Gazprom Export at the end of November.

A company spokesperson only confirmed that RWE had commenced arbitration proceedings; no other information regarding the claim, including an estimation of the damages it wants to recover from Gazprom, has been made public by the German party.

At the beginning of March, according to RWE’s financial report for the first quarter of this year, “contractual gas procurement volumes from Russian producers totaled about 1.45 billion cubic meters of gas through the end of 2023.

Additionally, it stated that RWE had contracts for fixed prices much lower than the going market rate for commodity deliveries from Russia.



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