EU Oil Cap Discussions Struggle for Unanimity Friday

EU discussions have failed to find consensus this week on a price cap level on Russian oil as part of its G7 efforts to hit Kremlin revenue while keeping volumes on the market.

• Leaked reports from the meetings suggested that $65-70/bbl was being discussed which has been widely criticized as too lenient and unlikely to make any difference to revenues.
• The cap is being spearheaded by the US. Biden was limited in his comments on the current status of discussions saying the cap was “in play” with little other detail.
• Around 70%-85% of Russia's crude exports are carried by tankers rather than pipelines. The idea of the price cap is to prohibit shipping, insurance and re-insurance companies from handling cargos of Russian crude around the globe, unless it is sold for no more than the price set by the G7 and its allies.
• Trading has remained cautious ahead of the price cap – with signs Chinese buyers are sitting out the market until there is more clarity.
• Putin has signalled again this week that Russia will not supply oil to anyone who abides by the cap.
• Discussions in the EU continue on the price cap with current sentiment leaning towards it being more lenient in nature. An announcement is unclear but EU leaders are eager to push it through as soon as possible with the December 5 deadline fast approaching.