- Group of Seven nations are in talks for two price caps on Russia's refined petroleum products, according to Bloomberg.
- The separate price caps would target products that are above the price of crude as well as those sold at a discount.
Group of Seven nations are in talks to impose two separate price caps on Russian refined petroleum products, according to a Tuesday Bloomberg report.
The upcoming price caps would coincide with the European Union's plan to ban imports of refined Russian products, such as diesel, naphtha and fuel oil, on February 5.
One price cap would target Russian products that are more expensive than crude and the other price cap would target those that sell at a discount, Bloomberg said.
The move will follow the EU's December 5 ban on seaborne Russian crude imports and the $60-a-barrel price cap that bars European companies from financing and insuring exports priced above that mark.
Talks regarding the new mechanisms and specific price levels remain ongoing, although the ban could pose more complications than the prior one. One G-7 official told reporters that diesel and kerosene historically trade at a premium compared to crude, and that fuel oil trades hands for cheaper. The looming February ban shouldn't pose any new supply issues for diesel, they noted.
A softening global market
Russian officials have said they would not acknowledge any price cap measures, and have threatened to slash oil output in retaliation.
Despite being the world's second largest crude exporter before the war, behind only Saudi Arabia, Moscow has lost most of its buyers since February 2022 and is struggling to replace European customers.
On Friday, Russian Urals traded far below the price cap level at $37.80 a barrel, Argus Media data shows. That's less than half the price of where Brent futures moved that day.
But that steep discount is more a reflection of an easing global market than any sanctions, according to oil historian Gregory Brew. Cheaper oil is largely a consequence of China's subdued demand, and coming price fluctuations will depend on how Beijing moves forward with its zero-COVID policies.
"Softer market conditions have made the [price] cap somewhat moot," Brew told Insider. "The market is somewhat oversupplied, and to say this is the result of the cap is a bit hard to argue."