G7 Plan to Cap Russian Oil Price, ‘Recipe for Disaster’
…….As Price May Hit $200 – SEB Group
In his prediction yesterday, the chief commodities analyst at Swedish bank SEB Group, Bjarne Schieldrop, said in no uncertain terms that the G7’s price capping proposal was a “recipe for disaster” given the current stress that the oil market is going through.
Last Tuesday, the G7 announced that it was studying ways that would enable the group achieve the capping of Russia’s oil price at the international market, and were wooing like-mind nations for support.
The G7 leaders argued that it would be unfair if Russia, as a major energy nation, capitalizes on the crisis and sell its oil at a price that would be injurious to both the international market and vulnerable customers.
The group said it was one of the critical items to be discussed at this week’s G7 meeting as the group tries to find creative ways to lower energy prices for themselves and maintain adequate crude supplies from Russia—while simultaneously punishing Russia in what many see as an impossible task.
U.S. Treasury Secretary Janet Yellen continued to put pressure on European countries to support a price cap.
According to Schieldrop, the plan seems “neat on paper, but it sounds like a recipe for disaster right now,” given the strong demand for crude oil and low supplies that so far given Russia the upper hand in the market.
Russia could, the analyst argued, choose not to sell the oil at a capped price—a decision that could lead to Russia’s production falling by as much as 2 million barrels per day.
Russia’s crude and condensate production rose in June by 5% to 10.7 million bpd, according to Kommersant sources—a figure that includes between 800,000 and 900,000 bpd of condensate, which is not included in the OPEC+ agreement.
But Russia’s oil exports have slipped 3.3% in June with the rise of domestic refining demand. Russian Deputy Prime Minister Alexander Novak said that Russia would raise its production again in July.