EU Is Close To The Russian Oil Price Cap Deal

Key Insights

• EU countries discuss a $60 price cap for Russian oil. 
• U.S. says that a $60 price cap would be within the range discussed by the U.S. Treasury. 
• EU will try to get the deal done before December 5. 

European Commission Recommends Setting The Russian Oil Price Cap At $60

According to a recent WSJ report, the European Commission asked EU members to set the Russian oil price cap at $60 per barrel.

Poland and the Baltic countries wanted to impose an aggressive price cap, but most members preferred a measured approach as pushing Russian oil out of the market would have pushed oil prices above the $100 level.

Meanwhile, U.S. Deputy Treasury Secretary Wally Adeyemo said that a $60 price cap was within the range of price levels that were discussed by the U.S. Treasury. He added that he believed that EU countries would soon reach consensus on the deal.

According to the reports, the price cap would be reviewed on a bi-monthly level. In case oil prices fall, the price cap would be moved lower to cut Russia’s revenues. Russia has previously said that it would not supply oil to countries that participate in the price cap deal.

The Next Few Days Will Be Extremely Important For Oil Markets

EU members will try to finalize the deal on the Russian oil price cap ahead of December 5, when the EU ban on buying Russian seaborne oil would be implemented. The price cap should replace this ban.

On December 4, OPEC+ will discuss its production policy. OPEC+ will meet virtually, which signals that it may leave the current production policy intact.

At this point, there are too many unpredictable variables that make it hard for OPEC+ to decide what to do with its production quotas.

It is extremely hard to predict the impact of the Russian oil price cap. The future of China’s zero-COVID policy is another important catalyst for the market. Perhaps, OPEC+ decided to take the wait-and-see approach, which is somewhat bearish for the oil market, as some traders expected that OPEC+ would cut production at the upcoming meeting.

For a look at all of today’s economic events, check out our economic calendar.