It'll take months for the impact on Russian oil from the EU price cap to feed through – and how bad it is depends on these 3 things, PIMCO says

• It will be months before we know the real impact of the EU price cap on Russian oil, PIMCO said.
• Where oil will be depends on 3 things, PIMCO's commodities strategist Greg Sharenow said.

It will be months before the real impact of Europe's price cap on Russian oil will become clear, and where oil ends up depends on three things, a top PIMCO commodities strategist has said.

There's a lot of debate over what effect will be of the $60 cap on the price of Russia's crude exports, which kicked in Monday, Greg Sharenow told Bloomberg. Doubts about how Moscow will respond is one clouded area, but there are others, he said.

"There's significant uncertainty, admittedly, because not only do we have to have companies and countries self-attest that they're buying oil under 60, they also have to accept Russian insurance," the PIMCO commodities and portfolio manager said Monday.

"Otherwise, if they're buying oil above that, which actually will lead some companies to probably look to not to transact with Russia."

A European Union ban on seaborne Russia oil imports came in alongside the price cap Monday. Under the ban, shipping service providers such as insurers are barred from dealing with vessels carrying supplies of the crude anywhere in the world.

But under the price cap agreed Saturday, EU and G7 member countries will still allow tankers carrying Russian barrels access to insurance and services if they sell the crude at or below the set level.

Together, the measures aim to limit President Vladimir Putin's ability to fund his war on Ukraine, while still keeping as much Russian oil flowing through global markets as possible.

"Where we'll be in several months will be a function of how many ships Russia can procure, how many loaders are willing to abide by the rules and regulations that are specified in the agreement over this weekend," Sharenow said, spelling out two factors.

The price cap already appears to be causing disruption, after oil tankers have started stacking up off the shores of Turkey, where authorities are demanding proof of full insurance.

Meanwhile, tanker charter prices are sky-high for ships willing to transport Russian oil amid sweeping sanctions, and Middle East and Asian buyers are opportunistically snapping up aging oil tankers to ship Russian fuel. Prices for 20-year-old Aframax tankers have nearly doubled this year.

Sharenow said the third thing to watch for is when sanctions on refined Russian oil products like diesel begin in February.

"That could end up being the most binding constraints on Russia, and their ability to sustain production will be their ability to ultimately export diesel," he said, noting it exports about about 800,000 barrels a day.

"If they're unable to continue to move all that oil, it will force a backup of oil in the country and likely shut in production," he added.

"So we still have several months away to knowing these answers."