Last weekend, European Union [EU] officials failed to agree about the price cap of Russian crude oil products that go into effect on February 5, being the next review time.

The group is also set to discuss the current crude oil price caps, Reuters said in a report yesterday. The group was originally set to review the crude oil price cap level every two months, which meant it was supposed to be reviewed in January, but some nations, part of the group—including the United States—wanted to wait until March to review the cap, which is currently set at $60 per barrel.

While the cap was originally set at $60 per barrel, the EU agreed last month that the cap should be set at a price that was at least 5% below average market rates—and that it should be reviewed periodically.
Reuters said not everyone in the group is on board with the current cap or the delay in reviewing it. Estonia, Lithuania, and Poland want a lower cap, arguing that Russian crude oil prices are below the cap, so it effectively is doing nothing.

The countries said they would like to see a much lower cap between $40 and $50 per barrel to further restrict Russia’s crude oil income and pressure it into abandoning the Ukraine invasion.
Next week, the EU will continue its talks about the upcoming price cap on diesel, with the EU’s Russian fuel import ban going into effect just over a week from now.

The European Commission has proposed a $100 per barrel cap on diesel, but the cap is unlikely to be agreed upon without much debate. The EU ban on Russian diesel imports is set to go into effect on February 5 whether or not a price cap is settled on beforehand.

The price cap would allow, similar to crude oil, a third party to purchase Russian diesel and insure it if it is purchased below the set cap.

By Ken Okoye

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