Russia is not selling crude under the price cap mechanism introduced by the G7 and EU in an effort to curtail Moscow’s energy revenues, Deputy Prime Minister Aleksandr Novak stated on Tuesday.
Oil companies are complying with a presidential decree obliging Russian legal entities and individuals to avoid Western-mandated oil price limits in their contracts with foreign buyers, he said, adding that Russian crude is traded at market prices.
“Initially, when the price ceiling was introduced, we said that this is a non-workable instrument. It makes things worse for consumers and for the entire global energy market. A special decree by the Russian president was issued on non-compliance with delivery terms under the price ceiling in contracts. Our companies are working within the framework of the decree and we are strictly monitoring this," Novak told reporters.
In December 2022, the EU, G7, and allied countries imposed an embargo and a $60 per-barrel price cap on Russian oil. Similar restrictions were introduced in February for exports of Russian petroleum products. The measures were aimed at reducing Russia's energy revenues.
Russian President Vladimir Putin subsequently signed a decree, which took effect on February 1, introducing retaliatory measures to the price cap on Russian oil exports. It bans the supply of oil and petroleum products to countries applying a price cap in their contracts and also prohibits deliveries if a contract directly or indirectly mentions the cap.
“Today we see that Brent prices have risen, the discount [on Russian oil] has decreased. Our products are sold at market prices, above the ceiling,” the deputy prime minister explained.
The Russian government earlier announced it would continue paring the discount of Russia’s flagship Urals blend of crude oil to the Brent benchmark. Reducing the discount is being done to help offset the effect that the drop in Urals prices was having on budget revenues.
This comes as global oil prices saw a massive quarter-on-quarter surge of nearly 30% over the period of July-September of this year amid restricted supply due to production cuts agreed by OPEC and its allies, led by Russia.
Brent futures stood at $90.8 per barrel, US West Texas Intermediate crude (WTI) was trading at $89.2 per barrel, while Urals was quoted at $80.2 per barrel on Tuesday.
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