As discussed previously, one of the most notable events of the past week was the decision by G7 leaders "to work" on a price cap for Russian oil as part of efforts to cut Moscow’s revenues.
However, it didn't take long for the same G7 motley crew to realize that they have a major problem on their hands: as JPM's commodity desk notes, given Russia’s strong fiscal position, the country can cut up to 5 mbd of production without excessively hurting its economic interest. Meanwhile, a 5mbd cut would spark a Europe-wide depression, confirming that once again Europe had not even done the simple math.
What about prices? According to JPM's commodities team (whose full note is available to pro subscribers), given the high levels of stress in the oil market, a cut of 3.0 mbd could cause global Brent price to jump to $190/bbl, while the most extreme scenario of a 5 mbd slash in production could drive oil price to a stratospheric $380/bbl.