This week, spot prices for Russia’s crude oil exceeded the $60-per-barrel limit imposed by the Group of Seven’s (G7) oil price cap initiative, reflecting tightened supply measures by Moscow and Riyadh. The G7 implemented the price cap scheme on December 5th, aiming to maintain Russian oil flows in the market while also restricting revenue generation for the Kremlin’s war funds. As a result, imports of Moscow’s crude were prohibited by the European Union in that same month.
Within the G7 scheme, non-G7 buyers of Russian crude can receive services from Western shipping and insurance providers if they acquire the crude oil at a price below $60 per barrel.
This week marked the first time since the implementation of the price cap mechanism that prices for Russia’s Crude oil primary export, the heavy-sulfur “sour” Urals loaded from the Primorsk, Ust-Luga, and Novorossiysk ports, surpassed the established threshold.
Spot assessments from commodities pricing agency Argus show that Urals prices on July 12 reached $60.18 and $60.78 per barrel for Primorsk and Novorossiysk-loaded cargoes, respectively. S&P Global Platts meanwhile valued Primorsk cargoes at $60.32 per barrel on July 11 and Novorossiysk Urals crude at $60.26 per barrel on July 12.
Crude oil traders
Several crude oil traders — who spoke to CNBC anonymously because of contractual restrictions — attributed the spot Urals price increase to underlying hikes in global oil prices, as Ice Brent futures with September expiry settled above $80 per barrel on July 12. The latest Thursday disruptions in Libya have sustained this level.
The Organization of the Petroleum Exporting Countries and the International Energy Agency forecast surging demand in the second half of the year.
On supply, some members of the OPEC+ group — comprising OPEC and its allies — are implementing 1.66 million barrels per day of voluntary production cuts until the end of 2024. Crowning this, Saudi Arabia announced an extra unilateral decline of 1 million barrels per day in July and August, while Russia committed to cut exports by an additional 500,000 barrels per day next month.
