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G7 countries and EU ambassadors meet to approve price cap on Russian oil

Oil prices have fallen by more than USD 2 a barrel on Wednesday as G7 nations together with EU ambassadors considered a moderate price cap on Russian oil, that according to some analysts would not do Russia much damage.

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EU ambassadors met on Wednesday to approve a cap on the price of Russian oil in the range of USD 60-70. For the cap to be approved, the support of all member states is needed.

Furthermore, G7 nations are also looking at a price cap on Russian seaborne oil in the range of USD 65-70 per barrel, according to a European official quoted by Reuters.

⚡️POLITICO: The G7 is preparing to announce a price cap on Russian oil and is eying a price of $65-70 per barrel, according to people familiar with the talks.

— KyivPost (@KyivPost) November 23, 2022

The diplomat said that most European countries supported the price cap, with only Poland and Hungary opposing it.

Poland wants the price cap on Russian oil to be drastically lowered to about USD 20, according to Wall Street Journal. The current trading price of Russian oil is approximately USD 61.

Right now, the price of Russian Urals is close to $60. Any #oil price cap in the $65-70 range would not affect revenue – yet. So #Russia has to decide whether it won't deliver under the cap purely as a matter of principle, or undermine its own ultimatum.

— Janis Kluge (@jakluge) November 23, 2022

No good will come from a moderate cap

According to Simone Tagliapietra from the Bruegel think tank, the G7 price cap would not do Russia much damage if the price cap was set at USD 65, the analyst was quoted by Bloomberg.

The price cap is part of sanctions intended to slash Moscow’s revenue from its oil exports so that it has less money to finance its invasion of Ukraine.

Because the world’s key shipping and insurance firms are based in G7 countries, the price cap would make it very difficult for Moscow to sell its biggest export item, accounting for some 10 percent of world supply, for a higher price.

On Wednesday Brent crude LCOc1 futures fell USD 2.71 to USD 85.65 a barrel, while U.S. West Texas Intermediate crude CLc1 futures fell USD 2.39 to USD 78.56 a barrel.

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