US says G7 should soon unveil price cap level on Russian oil

Reuters reported that the Group of Seven nations should soon announce the price cap on Russian oil exports and the coalition will probably adjust the level a few times a year rather than monthly, a senior US Treasury official said on Tuesday.

Key notes

The G7, including the United States, along with the EU and Australia are slated to implement the price cap on sea-borne exports of Russian oil on Dec. 5, as part of sanctions intended to punish Moscow for its invasion of Ukraine.

The aim is to reduce Russia’s petroleum revenues funding its war machine while maintaining flows of its oil to global markets to prevent price spikes. A cap on exports of Russian oil products is slated to begin on Feb. 5.

The coalition has agreed to set a fixed price on Russian oil rather than a floating rate, discounted to an oil price index.

The coalition worried that a floating price pegged below an oil benchmark might enable Russian President Vladimir Putin to easily game the mechanism by reducing supply, from Russia.

A US official said Washington does not expect Russia to retaliate by withholding oil exports as such a move could send global oil prices higher, but risks damaging Russian oil fields.