BNO - Russian crude oil tops $60 price cap for first time in test of Western sanctions
2023-07-15 20:05:00 ET
Russian Urals crude oil prices exceeded the G-7 oil price cap this week for the first time, with oil prices across the board rising as Saudi production cuts begin to take hold while demand moves higher.
Prices for Urals crude hit $62.22/bbl for oil ports in the Baltic Sea, and $63.22/bbl for supplies sent from the Black Sea, according to Argus - higher than the $60 cap for Russian crude imposed in December.
The tighter markets could ease the economic strain on Russia that Western countries had sought through the oil price cap, and perhaps prompt them to lower the cap.
The West has not needed to enforce its rule because Russian crude had been trading below $60/bbl since the price cap was introduced, but with prices now rising, the ability of Western authorities to enforce the cap is unclear.
Despite rising oil prices, buyers such as India seem unlikely to turn away from Russian oil, which supplied 46% of India's crude imports in May.
Instead, Russia could enlarge its fleet of illegal "shadow tankers" to ship oil outside the reach of the cap; estimates of its size vary widely, ranging from as high as 600 ships to as low as 100.
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Crude oil is critical to the Russian economy; before the Ukraine war, revenue from taxes and export tariffs on the oil and gas sector accounted for 45% of Russia's federal budget.
Russia's revenue from oil exports plunged by $1.5B in June to nearly half the level from a year ago, as oil exports fell to 7.3M bbl/day, their lowest level since March 2021, the International Energy Agency said in its latest monthly report .
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Russian crude oil tops $60 price cap for first time in test of Western sanctions