On December 5, the EU embargo on Russian oil transported by tankers takes effect and the price ceiling for marine oil supplies becomes active.
Regarding EU oil imports, there are still avenues to procure crude:
▪️ Oil delivered through pipelines until the EU Council enacts a ban on such supplies.
▪️ Oil loaded on ships that originate in or pass via Russia but are not Russian in origin remains permissible.
Germany and Poland have already signaled they will not buy pipeline-based crude from the northern Druzhba branch. Yet, reports indicate Warsaw has requested 3 million tons for 2023 to be pumped through Druzhba.
Hungary, the Czech Republic, and Slovakia also receive Russian oil through pipelines, with fuel traversing Ukraine via the southern Druzhba route. Officially, Hungary has voiced continued import demand. Bulgaria will be allowed to buy Russian oil and petroleum products by sea through the end of 2024, while Croatia will be allowed to purchase kerosene through the end of 2023. Through December 5, 2023, sales of pipeline-originated petroleum products to the Czech Republic remain permitted.
Oil shipments must not be diverted to a third country, including within the EU. All consignments of such crude must be marked as REBCO Export Prohibited on shipments and containers.
EU rules restrict Russian oil that is mixed with oil from other origins. If the share of non-Russian oil in the blend can be determined, that portion is not subject to sanctions. If the share cannot be determined precisely, the entire cargo cannot be unloaded in the EU.
EU sanctions also bar European tanker insurance and other financial or intermediary support from Russia to third countries for oil shipments. From February 5, 2023, a ban on purchasing petroleum products is planned.
What does the price cap mean?
Under the ceiling, sanctioning countries cannot provide brokerage, shipping, insurance, or other services for the sea transport of Russian oil to third countries unless the oil is sold at or below the cap of 60 dollars per barrel. The policy is backed by the G7 nations, the EU, and Australia, entities that control the bulk of global shipping and insurance. The cap is viewed as a softer instrument than a full ban on financing and insurance of Russian oil. The aim is to curb Russia’s revenue while helping stabilize global energy prices. Countries backing the cap have pledged a 90-day ban on services to ships carrying oil priced above the ceiling. Violating ships and services would face EU penalties.
US Treasury officials note that the cap is designed to leave incentives for Russia to participate in the world market while limiting high revenue gains.
Russian Urals oil trades around the cap, with prices reported near 50 dollars per barrel by industry trackers. In the January–November period, the Ministry of Finance indicates an average Urals price near 78 dollars per barrel, with November around 66 dollars. Prices have also been influenced by buyers who have reduced purchases or stopped using Russian oil altogether. The outcome depends on the actions of major buyers China and India, which together account for a large share of Russian exports and did not officially support the price-cap measure.
What is Russia saying
Moscow has not accepted a price ceiling on its oil. Officials indicate preparations are complete for responses to the cap. The Deputy Prime Minister has announced that mechanisms exist to adjust supply and that production could be reduced if needed. Critics describe the cap as market intervention, and Russia says it will work with buyers who engage only in market conditions.
Russia may need to scale back production due to the cap and embargo. Projected reductions could lower daily output below 10 million barrels and eventually toward mid-range levels seen in the late 2000s. Some reports suggest a reasonable price floor exists around 50 dollars per barrel, though this is linked to production capacity and market conditions.
How might the oil market respond
Before the Ukraine conflict began, EU nations accounted for a large portion of offshore Russian oil sales. International statistics show crude and refined products contributed a major share of Russia’s export revenues. With diversification toward other markets, India and China have emerged as the primary buyers alongside shifts in European demand patterns. Industry estimates indicate reductions in EU imports may approach nearly 1.1 to 1.4 million barrels per day, with further declines expected as the embargo proceeds.
Analysts warn of a potential spike in prices if European transport and insurance support for Russian oil is constrained. Some experts expect prices to exceed one hundred dollars per barrel in scenarios of further supply disruption. OPEC+ members have not altered production plans but may adjust in response to market signals. The broader sentiment remains cautious as major buyers reassess risk and supply sources amid ongoing policy adjustments.