The European Union (EU) has no plans to revise the $60 price cap imposed on Russian oil exports even though Russian crude is selling above the cap.
“There is no movement currently in the Council [of the European Union] with the oil price cap,” an unnamed diplomat from the Baltics told Energy Intelligence.
The news outlet noted that officially, the price cap is subject to review once every two months, in order to ensure it is 5% below the market price for Urals.
Russia’s flagship Urals crude blend traditionally sells at a discount to Brent, with that discount widening after the imposition of a price cap on all Russian oil exports as part of a sanction push following the invasion of Ukraine.
In the past few weeks, however, the discount between Urals and Brent has been narrowing, until this month, when it topped $60. At the time of writing, Urals was trading above $63 per barrel.
The Wall Street Journal noted in a report that this price rebound for Urals was evidence that Russia had adjusted to the sanction regime. It would also mean Russia’s oil export revenues would move higher, preventing which was one of the main goals of the price cap. The other goal was to keep global markets well supplied with oil.
From its inception, the idea of the price cap, conceived by the G7 last year, had its critics. These argued the goals of the cap are mutually exclusive, while advocates said it is possible to both keep Russia’s revenues lower and exports high.
In the end, the outcome has been kind of mixed, with Russia indeed seeing lower export revenues as the price of Urals remained depressed for months. Yet both Russian oil sellers and their clients have been using alternatives to Western shippers and insurers, essentially finding a way around the price cap, which only applies for buyers intending to use Western tankers and insurance coverage.