The European Union is currently in discussions to cap the price of Russian oil at somewhere between $65 and $70 per barrel, an EU diplomat told Reuters on Wednesday—a cap which, if approved, wouldn’t effectively lower the price of the flagship Russian crude currently being traded on the market.
The EU ambassadors of the 27-member bloc are considering proposals for the price cap, pushed by the G7 and Australia and aimed at limiting the oil revenues for Vladimir Putin. The G7, the UK, and the EU will ban as of December 5 maritime transportation services for Russian oil unless the crude is purchased at or below a certain price cap.
The EU is expected to discuss the price cap mechanism today and could possibly reach a decision and announce it as early as the end of the day on Wednesday.
“The G7 apparently is looking at a $65-70 per barrel bandwidth,” the EU diplomat told Reuters.
Such a price cap would be more or less the level at which Russian Urals currently trades. Per data from Statista, Urals traded at $23 a barrel below the international benchmark, Brent Crude, as of the end of last week.
The U.S. and G7 have said that they would consider such a cap that would not be below the cost of production for Russia in order to keep Russian oil flowing to the market. But a $65-$70 cap – as of Wednesday’s oil trade – is not really a severe cap, considering that Brent traded at $85 per barrel as of 7 a.m. ET.
Oil prices actually gave up earlier gains and slid by more than 2% after reports of a $65-$70 cap on Russian oil emerged.
As of 7 a.m. ET, Brent had dropped by 3% to $85.65, and the U.S. benchmark, WTI Crude, dipped below $80 a barrel again, to $78.70. Earlier this week, WTI Crude even fell to the $75 per barrel mark, the lowest level since January this year, before the Russian invasion of Ukraine.