Days after the European Union and G7 countries decided to cap Russian oil exports at $60 per barrel, the price of Brent crude shot up by almost 2% to $87.25 per barrel on Monday (December 5), reported BBC.
The development comes at a time when 23 Organization of the Petroleum Exporting Countries (OPEC) have agreed to cut down on the sale of crude oil in the global market.
With a shortage in oil supply, coupled with the arm-twisting of Russia by the European Union and G7 countries, it was expected that prices of crude oil would increase. To add to the woes, demand for oil has increased in several Chinese cities with the easing of the zero Covid-19 policy.
The idea behind caping Russian oil exports at $60 per barrel was to prevent Russia from ‘profiting’ from the ongoing war against Ukraine.
A price cap, set by European Union and G7 countries, implies that oil sold at the agreed price can be shipped using the tankers of the said countries, credit institutions and insurance companies.
It must be mentioned that Russia is the 2nd top producer of crude oil after Saudi Arabia. While reacting to the price cap on its oil exports, Kremlin spokesperson Dmitry Peskov said that Russia would not accept the price cap and soon decide its future course of action.
“We are assessing the situation. We will not accept this price ceiling and once the assessment is over, we will inform you how the work will be organised,” Peskov had said.
Russia’s permanent representative to international organisations in Vienna, Mikhail Ulyanov, warned that the EU would end up ruing their decision to impose the price cap.
Senior vice-president at Rystad Energy, Jorge Leon, told the BBC, “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 in the coming weeks.”