Russian crude breached the price ceiling set by the Group of Seven nations, while oil export earnings soared to an eight-month high, according to the International Energy Agency.
The price of the country’s seaborne crude shipments rose last month to $64.41 a barrel on a weighted average, “shattering” the $60 price limit set last year by the G-7, the AIE in the latest monthly report.
The Western alliance imposed the cap to limit the flow of petrodollars to Moscow amid the war in Ukraine, while keeping Russian oil flowing to global markets. Russia is one of the world’s top oil producers, and overly severe restrictions risked triggering a broader rise in prices. However, as the price data has emerged in recent weeks, the response from Washington and Brussels has been muted.
Under the cap, companies can only move Russian oil if they pay less than the threshold price, or lose access to key services such as insurance. The effect has been a complete reshaping of the global crude trade, with Moscow finding buyers mainly in India and China to fill the gap as Europe shuns Russian oil. Russia has relied heavily on a shadowy fleet of aging tankers as it continues to find a market for its crude.
The strength in Russian Urals crude prices reflects supply tensions for sour grades amid supply cuts within the OPEC+ oil alliance, the IEA said. Russia is also experiencing increased demand from its refineries following seasonal maintenance. According to the agency, restrictions on the country’s exports should continue to support prices.
By exceeding the price cap, Moscow has boosted its oil revenues, a key source of funding amid the rising cost of its war effort. Russia earned $15.3 billion from exports of its crude oil and fuel in July, up nearly 20 percent from the previous month, according to the IEA. However, the country’s oil revenues fell by more than a fifth compared to the previous year.
In response to Western sanctions, Russia pledged to curb crude output by 500,000 barrels a day, using February output as a benchmark, although earlier this year there was little evidence of adherence to that pledge . However, Moscow “more than met” this voluntary cut in July, the IEA said. Russia has also pledged to curb crude oil exports in August by 500,000 barrels per day, continuing those reductions at a reduced level in September.
Russia’s oil exports were flat in July at 7.3 million barrels a day after falling in June on a monthly basis, according to the IEA. Higher fuel shipments helped offset lower crude loads, the agency said.
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IEA highlights Russia’s oil production
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