PRICE CAP - ECONOMY
News: India
and China snap up Russian oil in April above 'price cap'
What's in the news?
● India and China have
snapped up the vast majority of Russian oil so far in April at prices above the
Western price cap of $60 per barrel,
according to traders and Reuters calculations.
Key takeaways:
● A G7 source said that the Western price
cap would remain unchanged for now, despite pressure from some European Union
countries, such as Poland, to lower the cap to increase pressure on Moscow.
● Urals
prices in Indian ports had traded at a discount of $14-$17 per barrel to dated
Brent on a DES basis in March, while the price at Chinese ports was around $11
per barrel against ICE Brent.
● Meanwhile,
output cuts announced by the OPEC+ group of oil producers at the start of April
have also boosted values for various grades around the world, including Urals.
● India
accounts for more than 70% of the seaborne supplies of the grade so far this
month and China for about 20%.
Price Cap:
● It
is a form of sanction proposed by
western countries against Russia for its invasion of Ukraine, as well as
Belarus for its support to Russia.
● The
Group of Seven (G-7) countries have
also been trying to convince key South Asian economies such as India, China to
join a coalition or support a price cap which would be in the interests of all
oil buyers from Russia as it will give them leverage to lower purchase prices.
Contradicting Views:
● The
advocates of the cap say it reduces revenues for Russia while allowing oil to
flow, but its opponents say it is too soft to force Russia to backtrack on its
activities in Ukraine.
Further Reference - G7 and Price Cap
(December 6, 2022)