EU mulling two price caps of $100/bbl and $45/bbl on refined Russian petroleum products – Reuters

The European Commission suggests that sanctions for refined Russian oil products could be set to $100/bbl for "premium" products under a new G7-led price cap, and "discount" products at $45/bbl.

PHOTO: The group of seven (G7) nations includes Canada, France, Germany, Italy, Japan, the UK and the US, with the EU as a "non-enumerated member". Getty Images

Price cap talks are expected to conclude this week, Reuters reports, citing EU officials. G7 and its allies plan to implement new price caps on 5 February, when the EU’s sanctions on refined Russian petroleum products take effect.

This is a second round of price caps on Russian oil, in which the "price cap coalition" of G7 nations, the EU and Australia has agreed to a two-cap approach.

The higher cap will apply to products like diesel and gasoline, which "generally trade at a premium to crude," while the other would apply to products like fuel oil, which "trade at a discount to crude," according to the US Treasury Department.

For bunker fuels, low-sulphur marine gasoil (LSMGO) would conceivably come in the higher end of the price cap while high-sulphur fuel oil (HSFO) would come in the lower end. It remains to be seen where very-low-sulphur fuel oil (VLSFO) will come in since these fuel blends can be made up of both high- and low sulphur blend stocks, which can fluctuate in price.

The European Commission has previously confirmed to ENGINE that unlike the EU’s import ban on seaborne Russian crude, there will not be a 45-day wind-down period for petroleum products.

Some traders and suppliers have informed ENGINE that they expect LSMGO and VLSFO supply to tighten in the ARA and wider European region, but mostly from the third quarter of this year.

The “price cap coalition” capped the price of seaborne Russian crude oil imports at $60/bbl in December last year. G7 officials will review it in March, after taking stock of market assessments following the second round of sanctions and caps on Russia.

By Konica Bhatt

Please get in touch with comments or additional info to news@engine.online