G7 may lower Russian oil price cap from US$60 to US$45 per barrel – Reuters

Most countries in the Group of Seven are prepared to independently lower the price cap on Russian oil, even if US President Donald Trump decides to withdraw from the initiative.

Source: Reuters, citing its sources

Details: Reuters sources note that efforts to lower the price cap are being led by the United Kingdom and the EU. The EU countries within the G7 (Italy, France and Germany), along with the UK and Canada, support the initiative. Meanwhile, the positions of the United States and Japan remain unclear.

The global drop in oil prices has rendered the current US$60 cap nearly irrelevant, prompting renewed discussions about lowering the price cap on Russian oil.

G7 leaders are scheduled to meet from 15 to 17 June in Canada, where they will discuss the oil price cap, which was first agreed at the end of 2022. The cap was designed to allow Russian oil to be sold to third countries using Western insurance services, provided the price did not exceed US$60 per barrel.

"There is a push among European countries to reduce the oil price cap to US$45 from US$60. There are positive signals from Canada, Britain and possibly the Japanese. We will use the G7 to try to get the US on board," said one of the sources.

The adoption of the package requires unanimous agreement among member states, which could take several weeks.

Russia’s largest export grade, Urals, trades at a discount of around US$10 per barrel to the Dated Brent benchmark out of Baltic ports. Brent futures have been trading below US$70 per barrel since early April.

Support from the US is not essential to lowering the cap, due to the UK’s dominance in global marine insurance and the EU’s influence over the tanker fleet. 

However, the US remains important when it comes to oil payments in US dollars and the role of its banking system.

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