European Union officials set Russian oil price cap at $60 a barrel

[BumRushDaShow]

Source: CNBC

The European Union on Friday agreed to cap Russian seaborne oil prices at $60 a barrel, after several days of intense negotiations over an appropriate level.

The announcement comes after the G-7 group of advanced economies agreed back in September to impose a limit on Russian seaborne crude and therefore constrain revenues the Kremlin makes from the commodity. However, details on how the cap would work in practice have been debated and hashed out since that point.

Russia, amid its onslaught in Ukraine, has warned that an oil price cap could wreak havoc on the energy markets and push commodity prices even higher. The price cap will be reviewed regularly to monitor its market ramifications, but it should be “at least 5% below the average market price,” an EU document with details of the cap said.

Negotiations had been held up by Poland, with ministers in Warsaw scrutinizing but then agreeing to the 5% adjustment mechanism. A formal announcement is expected on Sunday.

Read more: https://www.cnbc.com/2022/12/02/russia-oil-price-cap-g-7-outline-how-it-is-going-to-work.html

[republianmushroom]

1. LIKE

[flying_wahini]

2. Check out this price of crude oil per barrel by the decade

[link:https://www.macrotrends.net/1369/crude-oil-price-history-chart|

I think the $60 price seems high but what do I know.

Russia must sell crude to keep its head above water. Yea, they could sit on it and refine for themselves but they need the capital. Things will be getting a lot worse before they get better, I suspect.
With the wheat exports/reserves going down the toilet in Ukraine it’s going to be bad for another year, at the least.

[BumRushDaShow]

4. Apparently their "break even" for oil production

is somewhere between $30 - $40 but they need upwards of $60 - $70 to keep from economic default.

Most of what they are selling has been bought by China and India at a discount.

[Xolodno]

3. Price controls seldom work.

This seems more like a "feel good" story for the press. Russia is already selling at $65-$70 a barrel. The goal was to always keep the flow of oil coming while slightly hurting Russia's profits.

Poland and the Baltics wanted a cap at $35 (its estimated it costs Russia about $20 to produce the oil), but the rest of Europe balked at that as Putin would probably just shut off the spigot at that point. Then again, he still could if he's pissed off enough about the cap.

[Roy Rolling]

5. $70 / barrel

The U.S. plans to refill the national petroleum reserve with millions of barrels at $67-$82 a barrel.

That gigantic “buy” keeps $70 as a reasonably fair price for now.

[BumRushDaShow]

6. I was looking at WTI spot this afternoon and it has been running around $80/bbl

I know we started selling some more from the reserve just before the election so am not sure offhand if that is completed or not before we start buying again.