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EU members have agreed to support a price cap level of $100 per barrel on Russian diesel sales to third-party countries, people familiar with the matter told Bloomberg on Friday afternoon.
The EU’s ban on Russian seaborne crude oil products imports, including diesel and naphtha, is scheduled to go into effect on February 5. The EU’s proposal, submitted last week, called for capping the price of Russian diesel sold to third countries at $100 per barrel for products that trade at a premium and $45 for those that sell at a discount. Similarly to the price cap on Russian crude, buyers outside the EU would continue to have access to Western insurance and financing for cargoes if they comply with the price cap.
The proposal also included setting a price cap of $45 per barrel for discounted products such as fuel oil, which sources suggest has also been approved.
The goal of the price caps is to limit Russia’s revenues derived from crude oil and its refined products, while keeping the market supplied with Russian energy.
Despite the ban and price cap mechanism that are set to go into effect on Sunday, Russia’s energy minister said he saw no reason to reduce the country’s output on petroleum products, nor was it considering a reschedule for its refinery maintenance to make use of possible reduction in Russian demand.
Although the price cap goes into effect on Sunday, there is a grace period for cargoes loaded before the cap was agreed to that runs until April. Russian diesel prices were about $90 earlier this week, below the cap. Wood MacKenzie said earlier this week that a $100 cap would not have a significant effect on Russian refiners, but could bring its diesel exports down about 200,000 bpd.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.