Russian Deputy Prime Minister Alexander Novak said that Russia will stop the supply of oil and petroleum products to countries that decide to impose a ceiling price on Russian oil.
“We will not supply oil and petroleum products only for such companies or countries that will impose restrictions, as we will not operate in non-market conditions,” Novak said.
According to him, the idea of limiting the price of Russian oil is “totally ridiculous” and its implementation could destabilize the entire industry, causing oil prices to rise and consumers in Europe and the United States, who are already paying high prices. energy resources will suffer from this.
“This will completely destroy the market,” said the deputy prime minister.
He pointed out that not a single OPEC+ country, as well as China and India, support the idea of capping prices for Russian oil.
“We haven’t heard at least one positive response from other oil producers that have been on the market about this bullshit being discussed,” he said.
Novak also agreed that the oil futures market has been cut off from the real market due to sanctions. “Not only Venezuelan, Iranian, but also Russian oil [оказались под санкциями]”, – said. “And prices often take into account such sanctions restrictions and risks cut from life,” continued the Deputy Prime Minister.
Russia prepares for oil embargo
According to Novak, Russian oilers are now working with future EU sanctions in mind.
We are talking about the fact that from December 5, as part of the sixth package of sanctions, the ban on the purchase of Russian oil by EU countries by sea and the purchase of petroleum products will come into operation from February 5, 2023.
“Our companies know about December and are preparing for it. I hope all the plans they have take into account December. “All plans are adjusted to maintain current levels,” Novak said.
According to the Deputy Prime Minister, Russia produces exactly as much oil as it can be extracted and sold. He noted that this figure is growing and the trend will continue if oil companies can find a market.
In addition, Russian authorities have raised their oil production forecast. Novak said that by the end of the year, Russia could produce 520-525 million tons of oil and increase production by 0.2 percent.
Against the background of the Deputy Prime Minister’s statements, the prices of securities of oil companies rose sharply. Thus, at 6:15 p.m. Moscow time, shares of Lukoil increased by 11.08% to 4.74 thousand rubles per share, Bashneft – almost 5%, and Rosneft shares began to grow after a negative start. At 18:40, at the end of the trading session, Lukoil shares were up 10.59 percent to stabilize at 4.72 thousand rubles.
The idea of a “price cap”
Finance Ministers of the G7 countries will discuss the introduction of marginal prices for Russian oil on September 2. The White House believes that imposing a price ceiling will be an effective way to hit the benefits Russia is reaping.
US Deputy Secretary of State Victoria Nuland announced that if the import of Russian raw materials was completely banned, their prices could rise even higher, and then Moscow would make money by selling oil to other countries – India or China. A ceiling price, on the contrary, will not allow oil to be sold at a price higher than the set price.
“So the Russians will get a small portion of the profits to pay for their presence in the market,” Nuland said.
German Chancellor Olaf Scholz expressed his confidence that such a pricing mechanism should be agreed with most countries of the international community, otherwise it won’t work.
The idea of a ceiling price for Russian oil emerged during the G-7 summit in late June. The plan proposed by Washington is to exempt countries that only agree to buy fuel at a certain price from trucking insurance sanctions.
Bloomberg later reported Western countries are discussing the range of $40 to $60 per barrelThis will be higher than the cost of oil production, and in that case Russia will have an incentive to pursue it. At the same time, the US described the $40 limit as too low and could lead to a new jump in oil prices due to the reduction in Russian supply. According to Reuters, the G7 plans to set a price cap by December 5. Then the EU oil embargo will come into effect.
Commenting on the G7 initiative, Novak had previously predicted that the decision to limit Russian oil prices would cause an imbalance in the market and an increase in quotations. Analysts at American bank JPMorgan Chase & Co. Oil price may rise to $380 per barrelif sanctions force Moscow to “kick back” oil production.
Elvira Nabiullina, President of the Central Bank of the Russian Federation, also talked about the rising energy prices and noted that Moscow will direct the supply to countries that do not participate in the “price ceiling” initiative.