Connect with us

Hi, what are you looking for?

TOP news

Oil is likely to hit $200 a barrel under the disastrous G7 plan to cap Russian prices, an SEB analyst says

The G7 is exploring plans to cap the price of Russian oil.

iznashih/Getty Images

  • Oil prices could surge to above $200 a barrel if the G7 decides to try to cap Russian prices, an SEB analyst has said.
  • The G7 said Tuesday it’s exploring the feasibility of capping Russian oil prices, to dry up funding for President Vladimir Putin.
  • But Bjarne Schieldrop of Swedish bank SEB said Russian production could drop, ramping up the pressure on the market.

Oil prices are likely to surge to above $200 if the G7 implements plans to cap the price of Russian crude and products, according to an analyst at Swedish bank SEB.

Bjarne Schieldrop said Wednesday that the plans were a “recipe for disaster”, given the high levels of stress in the oil market, where prices have more than doubled to around $120 a barrel this year.

The G7, a group of the world’s most economically developed democracies, said Tuesday it is exploring the feasibility of capping Russian oil prices. It wants to stop the country from profiting from the surge in energy prices driven by its invasion of Ukraine.

The group, which includes the US, Germany and the UK, said it may attempt to stop the transportation of all Russian oil not purchased at or below a certain price. Full details are yet to be worked out, although plans would likely need widespread international agreement to be effective.

Schieldrop said the plan seems “neat on paper, but it sounds like a recipe for disaster right now.”

He said strong demand and low supplies had handed producers such as Russia immense power in the market this year. And he said Russia could choose not to sell its oil if a price cap came into force.

Schieldrop said the plans could cause Russian production to fall by as much as 2 million barrels per day, which would ratchet up the pressure on an already-stressed oil market.

“G7 countries are today praying that Russian oil exports will not go down,” Schieldrop said in a note on Wednesday. “Because if they do, then the oil price will spike from the current $117 a barrel to above $200 a barrel.”

He added: “Ultimately, if the price cap regime is implemented and buyers try to adhere to it, then naturally Russia will say ‘pay the price or no oil’.”

Russia produced around 10 million barrels per day in May, analysts estimate. Strategists think Russian output is already set to decline thanks to the EU’s plans to ban 90% of Russian oil imports by the end of 2022.

Brent crude, the international benchmark price, stood at around $119 a barrel on Wednesday, up just over 50% from the start of the year.

Click to comment

Leave a Reply

Your email address will not be published.


You May Also Like


Adeline van Houtte is the Economist Intelligence Unit’s lead analyst on Russia. It looks like Russia is at it again, after the unusual movement...

Health Care

Former President Donald Trump confirmed he had gotten a booster during a live show with Bill O’Reilly in Dallas on Sunday.

TOP news

US Navy aircraft carrier USS Carl Vinson leads other US Navy ships during an exercise with the Indian navy in 2012. US Navy Photo...

TOP news

Medical imaging service in a hospital in Savoie, France. A technician monitors a brain MRI scan session. BSIP/Universal Images Group via Getty Images A...