Thread
As of 2022-12-05, the G7 (comprising of 25 out of 27 EU nations along with UK, USA, Japan and Canada) will cease their maritime imports of Russian crude oil. The exempted nations are Bulgaria and Croatia due to pipelines into landlocked nations. Refined product ban on 2023-02-05.
With the removal of 29 direct export markets for Russia, the country will be left with a handful of volume importers who will each require deeper discounts in exchange for additional volume. This in itself, is a win for the G7 as it'll assure less profit for Putin.
In reality, the top remaining importers being China, India and Turkey will be able to export refined products to the G7 nations while also making a massive profit margin (buying cheap Russian crude and then selling market-rate fuel) in the process. That'll be acceptable.
This financial incentive will make the price cap very attractive and lucrative for the remaining importers, and even if they don't officially side with the G7 price cap, they are in effect enforcing it by buying at a massive discount. India and Turkey will ramp up more volume.
China already imports up to 1 million barrels per day by pipeline in addition to the maritime imports, so they're not likely going to boost imports any further as they'd grow too dependent on Russia. That goes against their national energy security policy.
Nations such as Saudi Arabia and Iraq are already understanding that there'll be less room for their oil in destinations such as India in particular, and are now looking at other destinations. The top remaining buyers for them will be the EU, undoubtedly.
Oil market finds a way.
Oil market finds a way.
I hope this thread sheds more light on how things may look going forth because I know a lot (if not most) of you don't fully grasp the concept of the G7 price cap. I think the G7 is also at blame for not explaining it properly from the start because "price cap" sounds silly.
The enforcement will come down to a combination of factors:
- EU owned & flagged tankers won't be able to touch Russian crude oil.
- 95% of insurers will not cover it either.
- G7-based financial services will avoid it as well.
This limits the options for remaining importers.
- EU owned & flagged tankers won't be able to touch Russian crude oil.
- 95% of insurers will not cover it either.
- G7-based financial services will avoid it as well.
This limits the options for remaining importers.
For those that do wish to use all the existing services that function (because alternatives will be too expensive and limited to use), then they can do so only if they buy Russian crude oil at a price that is beneath the agreed price cap set by the G7 nations.
I've heard of a broad range of price numbers but the G7 hasn't decided on one yet. Latest I read was that they'd use the average of the past five years (something like $60-64/barrel), but I also heard of some pushing for $20's because that's what Russia exported in 2020.
In conclusion, the grand objective of the "G7 price cap" is to:
- Get as much Russian crude oil to the global market in order to fight inflation.
- Limit the amount of profit Putin can use in his war against Ukraine.
Thank you for your time.
#OOTT
- Get as much Russian crude oil to the global market in order to fight inflation.
- Limit the amount of profit Putin can use in his war against Ukraine.
Thank you for your time.
#OOTT
Just adding this here to support tweet number 6 in the thread. India is Iraq's top crude oil destination. The industrialized economies will always get hold of supply, even if at the cost of the developing nations. The oil market always finds a way.
UPDATE:
"The coalition worried that a floating price pegged below the Brent international benchmark might enable Russian President Vladimir Putin to game the mechanism by reducing supply, a second source with knowledge of the discussions said."
www.reuters.com/world/exclusive-g7-coalition-has-agreed-set-fixed-price-russian-oil-source-2022-11-03...
"The coalition worried that a floating price pegged below the Brent international benchmark might enable Russian President Vladimir Putin to game the mechanism by reducing supply, a second source with knowledge of the discussions said."
www.reuters.com/world/exclusive-g7-coalition-has-agreed-set-fixed-price-russian-oil-source-2022-11-03...
UPDATE; just as covered in the tweet thread above.
I'm now thinking that if the G7 oil price cap on Russia ends up being effective either directly or indirectly (such as that India gets steeper discounts without siding with the G7), then we might start seeing the same proposal being drafted for Iran; but even cheaper. #OOTT
All going according to the thread above. India is taking in more Russian oil, freeing up more Saudi and Iraqi oil for export to Europe.
Musical chairs, boys and girls.
www.reuters.com/business/energy/indias-iraqi-oil-imports-fall-lowest-20-months-trade-sources-2022-11-...
Musical chairs, boys and girls.
www.reuters.com/business/energy/indias-iraqi-oil-imports-fall-lowest-20-months-trade-sources-2022-11-...
UPDATE from Janet Yellen is as per thread.
