The OPEC oil cartel and allied producers including Russia are not changing their targets for shipping oil to the global economy. The decision comes amid uncertainty about the impact of new Western sanctions against Russia.
Average gas prices have fallen for U.S. drivers in recent days to $3.41 per gallon, according to motoring club federation AAA.
To prevent a sudden loss of Russian crude, the price cap allows shipping and insurance companies to transport Russian oil to non-Western nations at or below that threshold. Most of the globe’s tanker fleet is covered by insurers in the G-7 or EU.Russia would likely try to evade the cap by organizing its own insurance and using the world’s shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome, analysts say.
Facing those uncertainties for the global oil market, OPEC oil ministers led by Saudi Arabia could leave production levels unchanged or cut output again to keep prices from declining further. Low prices mean less revenue for governments of producing nations. Maintaining OPEC production targets makes sense because “right now I think they see the market as adequately priced, adequately supplied, and there’s no reason to rock the boat,” said Gary Peach, oil markets analyst with Energy Intelligence.The G-7 price cap could prompt Russia to retaliate and take oil off the market. But the cap of $60 a barrel is near the current price of Russian oil, meaning Moscow could continue to sell while rejecting the cap in principle.
“If Russia ends up taking off more oil than about a million barrels per day, then the world becomes short on oil, and there would need to be an offset somewhere, whether that’s from OPEC or not,” said Jacques Rousseau, managing director at Clearview Energy Partners. “That’s going to be the key factor — is to figure out how much Russian oil is really leaving the market.”
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