Russia Unveils Oil Price-Floor Plan To Counter G-7 Cap

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by Tyler Durden
Tuesday, Dec 06, 2022 - 03:45 PM

Having already threatened to stop crude supplies to any client that adheres to the price cap that G-7 nations set out last week (and is ready to cut its oil production temporarily), Bloomberg reports that, according to two officials familiar with the plan, Russia is considering setting a price floor for its international oil sales.

One approach discussed envisions setting a maximum discount of Russian oil to global benchmarks, which the nation’s crude producers will not be allowed to exceed when offering their barrels to clients (unclear if these clients include China and India).

Another possibility is the imposition of fixed price for the nation's barrels.

As Bloomberg notes, there’s no visibility yet about what the precise level might be, and if it materializes traders will be focused on whether it’s above the cap level, or comfortably below. The level would be important because companies who want to access industry standard insurance and other key Group of Seven services can only do so if they pay $60 a barrel or less. Greek oil tankers would also be off limits for above-cap cargo purchases.

WTI is modestly 'off the lows' this morning after the Russia headlines...

Russia aims to offer a transparent pricing mechanism to buyers of its crude, adhering to a market-based approach to counteract the cap, one of the officials said, adding that The Kremlin doesn’t want to antagonize neutral states that buy its crude by putting any pressure on them through non-market steps.

Deputy Prime Minister Alexander Novak said Tuesday that any anti-cap tool that Russia uses will be adopted by year-end, suggesting there is no rush to respond.