Russia’s Its Crude Oil Smashed a Crucial G7 Price Cap

• Russia’s flagship Urals crude just breached the price cap of $60 a barrel on Tuesday, per S&P Global.
• The price cap came into effect on December 5 and sought to limit Moscow’s energy revenues.
• Russia’s current-account surplus tanked by 93% in the second quarter of this year.

Russia’s economy is struggling, but the commodities giant could be getting an uptick in its flagship oil price — the Urals crude oil price just breached a crucial cap for the first time since December 5.

A $60-a-barrel price cap has been imposed on Russia by the G7 countries to achieve two goals: it would limit Moscow’s energy revenues being routed into the Ukraine war, and it still allowed Russian oil to continue flowing to the world economy, thereby keeping a lid on red-hot inflation. 

But Russia’s flagship Urals crude oil prices have busted the price cap to reach $60.32 on Tuesday —  its highest level since mid-November 2022, according to a S&P Global commodity insights report.

An unnamed European oil trader told S&P there’s strong demand for Russian oil from Indian buyers. China has also been snapping up cargoes, Insider’s Phil Rosen reported in April. However, both countries have demanded huge discounts for their purchases.

The development could dent the Western-led efforts to hit Russia’s war chest, which has so far proven to be quite effective. 

After all, the price cap has severely hit Russia’s coffers this year. The country posted a current-account surplus of $5.4 billion in the second quarter — marking a massive 93% plunge from a record $76.7 billion surplus in the same period last year, according to Russia’s central bank data released Tuesday.

But Russia is an important commodity producer. It can impact the global supply — and prices — of raw materials.

The country announced an upcoming oil production cut earlier this month alongside another key oil producer Saudi Arabia.

These production cuts prop up oil prices as demand outsizes supply, an unnamed European oil trader told S&P. 

The benchmark US West Texas Intermediate crude oil futures were up 0.2% at $75.90 a barrel at 2.29 ET on Thursday. The global benchmark Brent crude oil prices were up 0.3% at $80.33 a barrel.