The G7 and the European Union want to introduce a price limit on Russian oil products

The G7 countries and the European Union plan to introduce a price limit for Russian oil products. Sanctions against them will start in February 2023.

Bloomberg writes about it.

Currently, the EU and the G7 are discussing the possibility of introducing two price limits: one for those oil products that are sold at high prices and the second for those that are sold at discounts.

From February 5, EU sanctions on the import of Russian oil products will come into effect. They also want to limit Russian exports to third countries by introducing a price limit. It will apply to diesel, diesel, and fuel oil.

Implementing such a mechanism for oil products is more difficult than for oil. There are petroleum products traditionally traded more expensive than oil, and there are those sold at a discount. In Europe, some officials were worried about the shortage of diesel last year, but experts say that the market is adapting to the new conditions.

In particular, there may be a redistribution of oil product supplies — Russia will start supplying more of them to Africa and Latin America instead of Europe, and the USA and the countries of the Middle East, on the contrary, to Europe.

• Russian oil is sold at twice the price of world markets. Urals crude oil costs $37.80 per barrel at the port of Primorsk. The global benchmark, Brent, is trading at $78.57. The Urals figure is also significantly lower than the price limit that the G7 countries have imposed on Russian oil. It is $60 per barrel.
• Restrictions on Russian oil came into effect on December 5, 2022. The introduced price limit allows shipping of Russian oil to third countries by sea, using tankers from the G7 countries or the EU, insurance companies, and credit institutions, only on condition that the cargo is purchased at a price that does not exceed the established upper limit. Since the worldʼs key shipping and insurance companies are based in the G7 countries and the European Union, the restriction should make it difficult for Russia to sell its oil at a higher price.