The countries participating in the agreement on a ceiling price for Russian crude oil and petroleum products delivered by sea agreed on the need to introduce two ceilings for petroleum products from the Russian Federation, depending on their category. This was announced by the US Treasury Department following an online meeting of the division’s first vice president, Adewale Adeyemo, with colleagues from coalition countries.
“One ceiling is typically for products that trade at a higher price than crude oil, such as diesel or kerosene, and the other is for products that are traded at a discount to crude oil, such as heating oil,” the newspaper said.
According to coalition representatives, this approach will allow for better establishment of a price cap for processed products, given the wide range of market prices at which these products are traded.
“The deputy ministers have acknowledged that limiting Russian oil prices to date has achieved the Price Ceiling Coalition’s twin goal of limiting Russia’s oil revenues and stabilizing global energy supply,” the deputy finance ministers said.
They also agreed to meet in March to discuss the ceiling on oil prices (the countries had previously agreed to revise it if necessary).
“This will allow the coalition to consider the evolution of the situation on world markets,” the US Treasury said.
The ceiling price for oil exported by sea is currently $60 per barrel.
Price ceilings and market situation
In December 2022, a coalition of countries was formed to limit the prices of Russian oil. It included the G7 countries (France, Great Britain, Germany, Italy, Canada, the USA and Japan), the European Union and Australia.
On December 5, the European Union stopped accepting Russian oil transported by sea, and the coalition countries set a maximum price for it at $ 60 per barrel – the transportation and insurance of more expensive oil is prohibited.
Similar measures for Russian petroleum products (diesel, kerosene and fuel oil) should come into effect on February 5, although the price limit is not yet known. At the same time, the European Union will refuse to buy petroleum products from the Russian Federation, banning their transport by sea.
A G7 spokesperson told Reuters on condition of anonymity that setting a price cap for petroleum products is more difficult than for crude because there are so many types and the price often depends on where it is purchased, not the producer.
Meanwhile, wholesale prices of diesel fuel in Russia have fallen to a minimum since February 2018. On January 20, St. Petersburg International Trade and Raw Materials Exchange announced that the cost of summer diesel fuel fell by 6.2% compared to a week, to 40,162 thousand rubles. per ton.
The Federal Antimonopoly Service told Kommersant that the price cut was due to a seasonal factor, but industry counterparts believe such dynamics may be due to a reduction in supply to Europe due to the imminent EU embargo on Russian oil products.
In response to the sanctions, Russian authorities banned the sale of oil and petroleum products to foreign citizens and companies from February 1, 2023, if contracts “directly or indirectly provide for the use of a price cap mechanism”.
In 2022, the Russian oil industry increased its production volume by 2%, while oil exports to non-CIS countries by pipelines and by sea increased by about 19%, reaching 207 million tons. At the same time, sanctions have forced Russian companies to reorient themselves to Asian markets, and the oil price ceiling could lead to a 7-8% drop in oil production in 2023, according to Russian Deputy Prime Minister Alexander Novak.
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.