The price cap on Russian crude oil products isn’t as effective as the implementers intended, according to Bloomberg, citing Argus Media Ltd data.
Several of Russia’s refined oil products continue to trade above the capped price laid out by the G7 as the nation continues to defy Western sanctions.
Diesel is one such product that Argus shows is trading above the cap. Meanwhile, naphtha and fuel oil are trading within the cap.
Not only is Russian diesel trading above the specified cap, but Russia’s diesel exports by sea jumped 5% in July compared to June, according to Reuters data, with refinery maintenance in the rearview.
Russia had roughly 5 million tonnes of refining capacity idled in May.
Most of this diesel is headed to Turkey, North Africa, Brazil, and the Middle East, with the EU sticking with its embargo on the product.
The price of the Russian ESPO crude blend has also risen to an eight-month high in another show of strength from Russia as it skirts the power of the G7 sanctions. The discount for ESPO vs. Brent is now the narrowest since the embargo went into effect in December, buoyed by strong demand from China’s independent refiners as well as India’s refiners.
Western sanctions have had little effect on crude oil prices from Russia for the grades that head primarily to China.
The price cap laid out by the G7 received criticism at its inception, with analysts predicting limited success with several large importers refusing to adhere to the limits.
Saudi Arabia and the UAE have not been shy about importing diesel from Russia without regard to price caps, while Europe has taken to importing diesel from the Middle East and Asia to compensate for the lost Russian barrels.