Russian Oil Price Cap Negotiations Enter The Final Stage

Key Insights

• EU countries are trying to reach a deal on the Russian oil price cap. 
• The latest reports indicate that the price cap may be set at $60.
• Neste data shows that Russia’s oil discount to Brent has been mostly stable in recent weeks. 

Russian Oil Price Cap May Be Set At $60

EU countries continue negotiations on the Russian oil price cap deal. Time is running out as the deal should be reached before December 5, when the EU sanctions on Russian oil will be implemented.

Yesterday, reports indicated that Poland and the Baltic countries, which are pushing for an aggressive price cap, had limited success, and EU discussed a price cap of $62 per barrel.

Today’s reports show that the potential price cap has moved to the $60 level. According to the reports, the deal may be reached if other demands are met. For example, Poland and the Baltic countries want a new package of EU sanctions on Russia.

Meanwhile, Greece wants to make sure that its shipping industry is not hit by the price cap scheme. Greece fears that non-EU countries will take its market share and transport Russian oil.

Russia’s Urals Discount To Brent Is Not Growing, According to Neste Data

Neste shows that Russia’s Urals discount to Brent oil has been in the $23 – $25 range in recent weeks. According to the data, the discount is not growing despite recent reports that indicated that Urals price declined to $52 per barrel ahead of the price cap.

The oil price cap negotiations have been challenging as two groups within the EU had opposing views. It looks that the majority of the EU countries will be happy with a $60 – $70 price cap, but the decision should be unanimous, so everyone has to agree with the proposed scheme.

At this point, the challenging negotiations had little impact on oil markets, which were focused on the recent developments in China. Oil traders believe that the price cap scheme would not disrupt the market, and Russian oil exports would not suffer a serious blow.

Traders should be prepared for strong moves after the EU announces the details of the price cap scheme, although it remains to be seen whether consensus will be reached ahead of the weekend.

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