Mon, Nov 18, 2024 | Jumada al-Awwal 17, 1446 | DXB ktweather icon0°C

Russia oil price cap will not be aimed at Opec: US

The price cap due for December 5 was designed specifically to address Russia’s attack on Ukraine and will not be carried over to other producers, says a United States Treasury official

Published: Wed 19 Oct 2022, 6:37 PM

  • By
  • Reuters

Top Stories

A worker is seen at Iraq's Majnoon oilfield near Basra. Brent crude futures for December settlement rose 31 cents, or 0.3 per cent, to $90.34 a barrel in early trading on Wednesday. A US Treasury official said new steps from Group of Seven countries to cap Russian oil sales at an enforced low price will not be replicated against Opec producers. He said the price cap due for December 5 was designed specifically to address Russia’s attack on Ukraine and will not be carried over to other producers. — Reuters

A worker is seen at Iraq's Majnoon oilfield near Basra. Brent crude futures for December settlement rose 31 cents, or 0.3 per cent, to $90.34 a barrel in early trading on Wednesday. A US Treasury official said new steps from Group of Seven countries to cap Russian oil sales at an enforced low price will not be replicated against Opec producers. He said the price cap due for December 5 was designed specifically to address Russia’s attack on Ukraine and will not be carried over to other producers. — Reuters

New steps from Group of Seven countries to cap Russian oil sales at an enforced low price will not be replicated against Opec producers, whose plans to cut output have irked consumer countries, a United States Treasury official told Reuters.

The United States has communicated to representatives of the Organisation of the Petroleum Exporting Countries (Opec) to reassure them of those limits to its plans, the official added.

The comments could help ease a spat between the United States and Saudi Arabia, the top oil exporter and de facto Opec leader, over what Washington sees as collaboration with Russia to deprive markets of supply just as a global recession looms.

Opec+, which groups the producer bloc with allies like Russia, announced last week that it would cut production by two million barrels per day to balance markets and quell volatility.

Saudi Arabia said the real reduction would likely be around 1 million barrels per day (bpd) as several Opec members have struggled to meet their existing output targets.

The United States last week said the cut would boost Russia’s revenue and suggested it had been engineered for political reasons by Saudi Arabia, which on Sunday denied it was supporting Moscow in its invasion of Ukraine.

The price cap due for December 5 was designed specifically to address Russia’s attack on Ukraine and will not be carried over to other producers, the official added, as their moves to rein in output drive up prices.

Nor do the new sanctions signal the beginning of a buyer’s group to counter the impact of Opec policies on the oil market, the official, who declined to be named due to the sensitivity of the situation, said.

The Paris-based International Energy Agency grouping of consumer countries, including the United States said last week that the Opec+ cut has driven up prices and could push the global economy into recession.

But the US Treasury official saw the cut’s price impact as muted, saying it might take a $30-$40 price rise or an output cut 10 times the size of the actual cut to Opec+ output of around 900,000bpd to trigger a recession.

The G7 is keen to deprive Moscow of wartime revenues but seeks to avoid a global supply shock, which could raise prices and hit their own citizens as global recession fears deepen.

Agreed by G7 nations in September, the price cap plan faced clashing with much stricter European Union bans on Russian shipments ratified in June.

The EU agreed to the cap this month but regulatory details have not been ironed out, increasing anxiety over the plan in the oil industry with six weeks to go.

Brent crude futures for December settlement rose 31 cents, or 0.3 per cent, to $90.34 a barrel in early trading on Wednesday. US West Texas Intermediate crude for November delivery, expiring on Thursday, was at $83.53 a barrel, up 71 cents, or 0.9 per cent. The December contract was at $82.63, up 56 cents, or 0.7 per cent. — Reuters



Next Story