A price cap on Russian seaborne oil – agreed to by the European Union, the Group of Seven nations and Australia – has come into force.
The $60-per-barrel cap on Russian crude is aimed at limiting Moscow’s income and curbing its ability to finance its war in Ukraine.
The deal has been criticised by Ukraine, which has said the cap is still higher than the current market price for Russian oil and won’t make much of a dent in Moscow’s war chest.
The Kremlin has said it won’t abide by the cap even if it means it will have to cut production. And Russia’s largest oil buyers – China and India – have not committed to the oil ceiling.
The cap took effect on Monday, a day after OPEC+ agreed to stick to its oil output targets.
How much oil does Russia produce?
Russia is a member of OPEC+, which is made up of the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
OPEC consists of Algeria, Angola, Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela. The allies are Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Oman, Russia, South Sudan and Sudan.
OPEC member countries produce about 40 percent of the world’s crude oil and represent 60 percent of the total petroleum traded internationally, according to the United States Energy Information Administration.
Russia is the second-largest producer of crude oil among OPEC+ members, coming in behind Saudi Arabia. It pumped more than 9.7 million barrels per day in October, according to the International Energy Agency (IEA).
Two months ago, OPEC+ members agreed to cut production by 2 million barrels per day from November until the end of 2023. The cut amounted to about two percent of world demand.
The move angered the United States and other Western nations. Washington accused OPEC+ of siding with Russia despite its invasion of Ukraine.
Who imports Russian oil in Europe?
Russia is the world’s largest exporter of crude and refined oil products, according to the IEA. It is the second largest exporter of crude oil, coming behind only Saudi Arabia.
European countries that are part of the Organisation for Economic Co-operation and Development (OECD) imported 34 percent of their oil from Russia in November 2021, according to data from the IEA. That month, Russia exported 7.8 million barrels per day.
The OECD’s European members include Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.
Lithuania imported 83 percent of its crude oil and refined products from Russia, or about 185,000 barrels per day. Other European countries imported more than half their total oil from Russia, including Finland (79 percent), Slovakia (74 percent) and Poland (58 percent).
Germany imported the largest quantity of crude and refined oil products in November 2021 at 835,000 barrels per day (31 percent of its total oil imports).
After Russia’s invasion of Ukraine, some European states reduced their reliance on Russian oil. Most significantly, Lithuania decreased the percentage of its imports coming from Russia to just one percent by August, according to the latest data available from the IEA.
Likewise, Finland now imports eight percent of its oil from Russia.
Other countries – such as Slovakia, Hungary, the Czech Republic, Turkey, Latvia and Italy – have increased the percentage of their oil imports coming from Russia since 2021.
Oil prices in 2022
Countries from the United States and Canada to Japan and New Zealand have imposed sanctions on Russia since its invasion of Ukraine. The sanctions target its banks, military exports and oil refineries.
The ensuing energy war has caused oil prices to reach highs not seen since the 2008 financial crisis.
Brent and WTI are the global benchmarks for light, sweet crude oil. Brent is drilled out of the North Sea between the UK and Norway while WTI (West Texas Intermediate) is sourced from US oilfields.
Both Brent and WTI crude oil prices soared in early March after the invasion. Prices have since come down from their highs. However, after OPEC+’s announcement in October about decreasing production, oil prices began to rise again before coming back down to levels seen before the invasion began.