Spot prices of Russia’s crude oil have exceeded the $60-per-barrel threshold set by the Group of Seven’s (G7) oil price cap scheme. This comes as Moscow and Riyadh tighten supplies, leading to a surge in global oil prices. The G7 introduced the price cap mechanism in December 2024 to retain Russian flows in the market while limiting revenue for the Kremlin’s war coffers. Under the scheme, Western shipping and insurance providers can offer services to non-G7 buyers of Russian crude if the price remains below $60 per barrel. However, prices for Russia’s main export crude, the heavy-sulfur Urals, have now surpassed this threshold for the first time since the mechanism was implemented. The increase in spot Urals prices can be attributed to underlying hikes in global oil prices and disruptions in Libya. The Organization of the Petroleum Exporting Countries and the International Energy Agency forecast surging demand in the second half of the year. Meanwhile, some members of the OPEC+ group, including Saudi Arabia and Russia, have implemented voluntary production cuts, further tightening supplies. The increase in Russian crude prices may impact shipping and insurance arrangements, particularly for the “grey” fleet that transports Russian crude bought within the G7 scheme. However, some Russian crude transport, particularly to key buyer India, is largely insured by non-Western providers and carried on Russia’s own fleet.
How has the tightening of supplies by Moscow and Riyadh impacted the spot prices of Russia’s crude oil?
Spot prices of Russia’s crude oil have soared above the $60-per-barrel mark, surpassing the threshold set by the Group of Seven’s (G7) oil price cap scheme. This surge in prices is a result of Moscow and Riyadh tightening supplies, leading to a worldwide increase in oil prices. The G7 implemented the price cap mechanism in December 2024 to keep Russian flows in the market while curbing revenue for the Kremlin’s war efforts.
According to the scheme, Western shipping and insurance providers can offer their services to non-G7 buyers of Russian crude as long as the price remains below $60 per barrel. However, the price of Russia’s main export crude, the heavy-sulfur Urals, has now exceeded this threshold for the first time since the mechanism was put in place. This increase in spot Urals prices can be attributed to rising global oil prices and disruptions in Libya.
The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have predicted a significant surge in demand for oil in the latter half of the year. In response, some members of the OPEC+ group, including Saudi Arabia and Russia, have voluntarily cut their production, further tightening supplies.
As a consequence of the elevated Russian crude prices, shipping and insurance arrangements may be impacted, particularly for the “grey” fleet that transports Russian crude purchased within the G7 scheme. However, it is important to note that a significant portion of Russian crude transport, especially to key buyer India, is predominantly insured by non-Western providers and carried on Russia’s own fleet.
Overall, the increase in spot prices of Russia’s crude oil adds to the current dynamics of the global oil market, influenced by demand forecasts and supply disruptions.
This article sheds light on the recent surge in Russian crude oil prices, surpassing the G7 cap. The tightening of supplies by Moscow and Riyadh is a cause for concern, as it could potentially impact global oil markets.