G7 leaders plan to cap Russian oil prices to increase pressure on Russia over war in Ukraine

2022-07-04 12:44:33
Machine translation
G7 leaders plan to cap Russian oil prices to increase pressure on Russia over war in Ukraine

At the G7 summit held at the end of June, the leaders of the "Big Seven" countries discussed options for increasing pressure on Russia and limiting its financial capabilities, as well as stabilizing energy prices. Japanese Prime Minister Fumio Kishida said that "the world is in a situation where the foundations of order are collapsing, so it is necessary to demonstrate that any violence will have a heavy price."

 

The mechanism proposed by the G7 leaders will limit the price of Russian oil at a level that will be half of its current price, and will prevent the purchase of oil at a price that exceeds the set price.

 

At the end of last week, September futures for Brent oil rose by 2.3% to $111.6/barrel (+2.3% for the week and -4.8% for the month), and for WTI oil - by 2. 5% to $108.4/barrel (+0.5% for the week and -7.1% for the month).

 

The reason for the increase in prices was the forecast of JPMorgan Chase&Co analysts, according to which Russia's reduction of oil production by 3 million barrels/day under the pressure of sanctions will lead to an increase in oil prices on the London ICE exchange to $190/barrel. And in case of production reduction by 5 million barrels/day, prices will reach $380/barrel. In addition, Russia may reduce oil exports to worsen the situation on the European market.

 

The Russian government reported last week that in February the country produced 10.2 million barrels/day, now the average oil production is 9.9 million barrels/day, and in the near future it is planned to fully choose the quota determined by the agreement with OPEC and produce 11 million barrels/day.

 

Russia is already openly using oil and gas supplies as a weapon against the West, and has now dramatically reduced gas supplies to the EU. In case of a decrease in oil or gas prices, it sharply reduces supplies, which leads to an increase in world quotations and creates problems in the economies of all countries.

Visitors’ comments (0):