Dhe EU countries have agreed on a price cap for Russian oil. Together with international partners, they want to force Russia to start selling oil to buyers in other countries for a maximum of USD 60 (about EUR 57) per barrel (159 liters) from Monday. Government representatives made a corresponding agreement after long negotiations in Brussels, as several diplomats from the German Press Agency confirmed on Friday. If possible, the price should apply from Monday.
The seven leading democratic economic powers (G7) and Australia want to join the action. This was announced by the G7 on Saturday night. In addition to Germany, the G7 also includes the USA, Canada, France, Great Britain, Italy and Japan. Germany currently chairs the group.
Poland hesitates, but joins in
After much hesitation, Poland also agreed to the price cap on Russian oil planned by the European Union. In addition, an adjustment mechanism is planned that keeps the limit at least five percent below the market price should a barrel of oil become cheaper than 60 dollars, said Poland’s EU ambassador Andrzej Sados on Friday. His country had argued for the largest possible discount on the market price in order to make it more difficult for Russia to finance the war against Ukraine. With Poland’s approval, the EU states can now formally wrap up the price cap that is to apply to Russian oil transported by sea over the weekend.
In a first reaction, EU Commission President Ursula von der Leyen pointed out that the price cap could be adjusted over time. He will also stabilize the global energy markets, she explained in a video message. US National Security Council spokesman John Kirby also spoke of the possibility of customizing the lid. This will help limit Russian President Vladimir Putin’s oil profits.
US government welcomes EU decision on price cap for Russian oil
The US government welcomed the agreement. “That’s good news,” National Security Council communications director John Kirby said on Friday. US President Joe Biden advocated this very emphatically at the G-7 summit in the summer. “We believe the price cap will have the desired effect by limiting Mr. Putin’s ability to profit from oil sales and his ability to continue using that money to fund his war machine,” Kirby said Russian President Vladimir Putin and his war against Ukraine.
The EU, together with international partners, wants to force Russia to sell oil below the market price to buyers in other countries. An agreement reached by government officials on Friday provides for an initial price cap of $60 per barrel. The price of around 57 euros per 159 liters would then be up to 9 euros below the most recent market price for Russian Urals crude oil. According to the plans, it will apply from Monday.
“We think the price of $60 a barrel is reasonable and we believe it will have that impact,” Kirby said. There is also the possibility to adjust this value in the future.
The price for the North Sea oil grade Brent rose only slightly on the international raw materials market immediately after the EU decision became known.
Even before that, oil prices had risen only slightly on Friday after a boost in the current week. In the afternoon, a barrel (159 liters) of North Sea Brent cost US$ 87.17. That was 4 cents more than the day before. The price of a barrel of American West Texas Intermediate (WTI) grade rose by 31 cents to $81.54.
The situation on the market has thus calmed down after the strong price increase since the beginning of the week. The dollar, which strengthened after a robust US jobs report, weighed on oil prices only temporarily. Since Monday, the price of Brent oil has risen by around six dollars a barrel. In the past few days, the oil market has benefited from a somewhat less strict corona policy in China, which experts also attribute to the wave of protests among the population.
“Oil prices have recovered mainly because of the cautious easing of China’s strict zero-Covid policy,” commented commodities expert Carsten Fritsch from Commerzbank. In addition, the US Federal Reserve is heading towards fewer rate hikes, which should boost the economy in the US and, according to analysts, should support demand for crude oil.
On the oil market, investors are also waiting for decisions from the meeting of oil states that have joined forces in the Opec+ group. The producing countries want to discuss their production policy on Sunday. It is expected that the approximately 20 countries will stick to their previous line. At the beginning of November, the oil association had noticeably reduced its production and thus reacted to a drop in oil prices.