After nine months of a Western-imposed price ceiling on Russian oil exports, the Kremlin has developed a slate of countries willing to import energy from Moscow. Initially, Moscow priced its oil at a heavy discount to draw in customers, but Russia has recently been able to sell its energy at near market value.
In December, the US and the Group of 7 (G7) announced that any firms or countries buying Russian oil for over $60 per barrel would face economic penalties. Last month, Russian oil sold on the market for an average of $74 per barrel, well above the price cap.
Callum Macpherson, head of commodities at Investec, explained Moscow’s first response to the price cap. “The sanctions have not led to a significant curtailment in Russian output as the market has been able to reorganize itself to reroute trade flows to keep Russian crude in the market,” he said. “Russia has had to accept a significant discount to achieve this.”
Jorge León, vice president and head of oil analysis at the Rystad Energy consultancy, told EL PAÍS that the discount has significantly shrunk. “Historically, before the war, both mixtures were practically at parity.” He continued, “Last year, with the cap and the sanctions, the discount reached $40 per barrel. Today, we’re at around $15. That’s thanks to the cap [on Russian oil prices], although it has been less relevant than initially expected.”
Oilprice.com reports the discount on Russian oil has decreased to as little as $5 per barrel.
Reuters reports the US and its partners in the G7 have no plans to adjust the price cap on Russian oil. “The G7 and allies have shelved regular reviews of the Russian oil price cap scheme, people familiar with the matter told Reuters,” the outlet reported last week. The last time the cap was reviewed was in March.
The trend is likely to continue as Moscow is finding new major buyers for Russian oil. This week, the first Russian oil tanker is expected to arrive in Brazil with 650,000 barrels of oil.
León additionally notes Moscow has now developed a fleet of ships to sell its energy to new partners. “Russia has developed its national fleet of oil tankers to be able to carry that crude – especially to Asia – and it has gotten Chinese and Indian companies to participate in the transport of that crude. And that makes the cap less effective, because Russia is able to export its crude without resorting to European services, especially British and Greek fleets,” he said.