Oil prices are likely to rise past US$200 per barrel if the Group of Seven (G7) manages to cap the price of Russian crude oil.
Citing Bjarne Schieldrop, the chief commodities analyst at Swedish bank SEB Group, on Wednesday (June 29), energy portal Oilprice.com said that the G7’s price capping proposal is a “recipe for disaster” given the current stress that the oil market is under.
G7 leaders agreed on Tuesday to study ways to cap the price of Russian oil sold internationally and are seeking support among “like-minded” nations.
It is one of the critical items being discussed in this week’s G7 meeting as the group tries to find creative ways to lower energy prices for themselves and maintain adequate crude supplies from Russia — while simultaneously punishing Russia in what many see as an impossible task.
US Treasury Secretary Janet Yellen continued to put pressure on European countries to support a price cap.
Oilprice.com said that according to Schieldrop, the plan seems “neat on paper, but it sounds like a recipe for disaster right now”, given the strong demand for crude oil and low supplies that have so far given Russia the upper hand in the market. Russia could choose not to sell the oil at a capped price — a decision that could lead to Russia’s production falling by as much as two million barrels per day.
Russia’s crude and condensate production rose in June by 5% to 10.7 million bpd, according to Kommersant sources — a figure that included between 800,000 and 900,000 bpd of condensate, which is not included in the OPEC+ agreement.
But Russia’s oil exports have slipped 3.3% in June with a rise in domestic refining demand.
Reuters said oil prices edged higher on Thursday after dipping in early Asian trade as concerns about global supply tightness outweighed a build in US gasoline and distillate inventories.
Brent crude futures for September, the more actively traded contract, rose 63 cents, or 0.6%, to US$113.08 a barrel. The less liquidly traded August contract expiring on Thursday was at US$116.08, down 18 cents, or 0.2%.
--Agencies
