Global Oil Price Surges Amidst Sanction On Russian Crude Oil

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Credit: Shaah Shahidh/ unsplash
  • Oil prices have risen amid concerns of a new cap on the price of Russian crude.
  • It could disrupt global supplies in the coming months.
  • A decision by major oil-producing countries to keep cutting how much they produce to prop up prices has also fuelled the rise.

The price of Brent crude oil rose by almost 2% to $87.25 a barrel. Higher oil prices tend to push up petrol prices and the cost of living which, in the UK, is rising at its fastest pace in 41 years.

Price Cap

The G7 group of major economies implemented a cap on the price of Russian oil at $60 a barrel to “prevent Russia from profiting from its war of aggression against Ukraine”. It will stop any Russian crude sold for more than that price from being shipped using G7 and EU tankers, insurance companies and credit institutions. 

However, Russia – which is the world’s second biggest producer of crude oil – has said it will not accept the price cap and threatened to stop exporting oil to countries adopting the measures. “Russia has been very clear that they will not sell crude [oil] to anybody signing up to the price cap,”  said Jorge Leon, senior vice-president at Norwegian energy consultancy Rystad Energy. “So probably what’s going to happen is that we will see some disruptions in the coming months and therefore probably oil prices are going to start increasing again” 

Meanwhile, on Sunday the group of top oil-producing countries known as Opec+ said it would stick to its policy of reducing output to prop up global prices. In the wake of Russia’s invasion of Ukraine, global oil prices soared to more than $120 a barrel amid concerns about a shortfall in global supplies from Russia.

China Factor

Analysts said oil prices had also been boosted by the easing of Covid restrictions in some Chinese cities, which could lead to an increase in demand for oil. More cities in China, including Urumqi in the north west, have said they will loosen strict lockdown rules after mass protests against the country’s zero-Covid policy.

The $60 cap on Russian oil comes on top of an EU embargo on imports of Russian crude oil by sea and similar pledges by the US, Canada, Japan and the UK. While the measures will most certainly be felt by Russia, the blow will be partially softened by its move to sell its oil to other markets such as India and China, who are currently the largest single buyers of Russian crude oil.

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Source: BBC

 

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