More Russian oil trades above G-7 price cap despite sanctions

Several of Russia’s refined oil products are trading above the price cap imposed by Group of Seven nations, in another sign that the value of its barrels is rising in defiance of sanctions. 

Since February, there have been two caps on the sale of Russian refined fuels, one for higher value products at $100 a barrel and another for lower ones at $45. Argus Media Ltd., whose prices are central to the caps, says naphtha and fuel oil are trading above the lower cap, while diesel is trading above the higher one. 

Of the products that are yet to breach the cap at Russia’s western ports, gasoil and gasoline are both approaching that ceiling, with the value of both fuels surging globally. 

Last month, Russia’s flagship Urals crude breached the price cap for the first time, offering a victory of sorts for Moscow which assembled a shadow fleet of ships big enough to transport its supplies to buyers while circumventing G-7 services. There also signs that Moscow is starting to deliver on the production cuts it agreed with its allies in the Organization of Petroleum Exporting Countries. 

On Tuesday, a senior US administration official said that countries signed up to the cap are continuing to monitor the policy’s progress and that its success would be gauged by whether Russia’s revenue is lower than it would be if there were no measures in place. The official said that Russia’s assembly of a fleet of vessels to ship its oil was a victory for the policy as it diverted resources away from Moscow’s war on Ukraine. 

The price cap on refined fuels is more complicated than the one on crude as it involves two different sets of prices for a myriad of products. For naphtha, in particular, there have been different categorizations of customs codes that could split cargoes between either the lower or higher value caps. 

The measures are only designed to reflect the use of services provided by countries that sign up to the cap. Transporting oil and refined products above the price cap using insurance or tankers from non-signatories wouldn’t be subject to sanctions.