The Group of Seven (G7) coalition will seek to set two price caps on Russian refined products in February, one for products trading at a premium to crude oil and the other for those trading at a discount, said a G7 official.
The coalition – which includes Australia, Canada, Japan and the United States, as well as the 27 countries of the European Union – has introduced a price cap of $60 a barrel on Russian crude from 5 December, in addition to the EU embargo on imports of Russian crude by sea. .
From February 5, the coalition will also impose price caps on Russian products, such as diesel, kerosene and fuel oil, to further reduce Moscow’s income from energy exports and its ability to finance its invasion of Ukraine.
But capping the price of petroleum products is more complicated than setting a price cap on crude alone, because there are many petroleum products and their price often depends on where they are purchased, rather than where they are produced, the official said, asking not to be named. .
Citing the example of diesel and kerosene which tend to trade at a higher price than crude, while fuel oil generally sells at a discount, he said that was why the G7 was considering two caps on price.
While wishing to deprive Moscow of revenue, the coalition wants to avoid unbalancing the global energy market and raising prices for consumers in their own country.
International oil prices rose after the initial price cap on December 5, on fears of disruption, but have since retreated.
Russia has pledged not to sell oil to countries adopting the caps, which for Europe could be particularly complicated in the case of refined products.
Europe remains heavily dependent on Russian diesel, with volumes last month accounting for almost half of the continent’s total imports, according to data from Refinitiv.
Product prices depend on specifications, including sulfur and metal content. For example, low sulfur fuel oil currently trades at around $150 per ton above the high sulfur variety.
Diesel prices are trading at a premium of $40 a barrel above dated Brent prices, according to Reuters valuations.