Russia’s flagship crude grade, Urals, is currently being exported at a price of around $75 per barrel, per Argus Media data cited by Bloomberg—a price that’s $15 a barrel above the $60 price cap set by the G7 and partners if the oil is to be moved with the help of Western shippers, insurers, and financiers.
The price cap mechanism set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.
At the end of 2023, nearly all of Russia’s crude was being sold above the price cap. Western officials, especially in the U.S., have since moved to tighten sanctions enforcement as they seek to reduce oil revenues for Russia without depriving the world of Russia’s oil exports.
The recent price increase of Russian crude is being closely watched by U.S. officials. They attribute the rise to the wider oil market developments and geopolitical dynamics, an official at the U.S. Department of the Treasury told Bloomberg.
Last month, nearly a quarter of Russia’s crude oil shipments – 23% -- were insured by members of the International Group of P&I Clubs, according to data compiled by Bloomberg.
Still, there have been reports and signs that the tightened sanction enforcement is damaging Russian exports and oil revenues, to some extent.
The sanctions' estimated direct cost to deliver Russian cargoes now is around 6-8% of the price of a barrel of crude leaving the western ports in Russia for Asia, according to data from commodity price reporting agency Argus crunched by Bloomberg.
Russia is also said to be seeing months of delays in payments for its oil exports as banks in its major trader partners, including China, the UAE, and Turkey, are now scrutinizing transactions wary of the tighter U.S. sanctions.
By Charles Kennedy for Oilprice.com
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Furthermore, President Putin signed a decree at the time of the launching of the price cap prohibiting Russian oil companies from selling Russian crudes at $60 or less a barrel.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert/