The Urals grade, by far the country’s top export stream, was $37.80 a barrel at the Baltic Sea port of Primorsk on Friday, according to data provided by Argus Media. That was less than half where Brent futures settled on the same day.
The ballooning discount follows the European ban on almost all seaborne crude imports from Russia that imposed from Dec. 5. Simultaneously, the European Union joined with the G-7 industrialized nations in imposing a cap on the price of Russian supply. Anyone wishing access to Western services — in particular industry standard insurance, but also an array of other things — could only do so if they paid $60 of less.
The western price cap is “illegal” and will affect stability of the global energy supply, requiring “significant cooperative effort by responsible countries to remedy,” the ministry said, reiterating earlier statements by President Vladimir Putin and top Russian energy officials.
Russia is prepared to cut its crude production by 500,000-700,000 barrels a day in response to the threshold, Deputy Prime Minister Alexander Novak said last month.
The energy markets remain in a state of flux. Europe wants cheaper energy but the USA is now an exporter with a government willing to buy at around $70. Meanwhile the perennial issue of sustaining sufficiently high prices to balance bloated budgets among OPEC members has not gone away. Russia has a challenge in reducing supply because many of its wells are in permafrost. Once shut down, these wells cannot easily be turned back on.
Europe appears to be increasingly willing to flex its economic muscle. The cap on Russian oil prices follows closely on the heels of the carbon import tax proposals. From the inside these are viewed as necessary steps. From the outside, most people will view this as a protectionist move not unlike the USA’s trade wars.
West Texas Intermediate continues to hover just above the upper band at which the US government has committed to buy. At $48 Western Canada Select is back inside the pre-pandemic range.Back to top