IEA: Russian crude, product prices rise above G7 price cap

Sept. 4, 2023

Russian crude oil prices have progressed rapidly since the end of June, surpassing the G7 price cap on July 12 for Urals and July 7 for Siberian Light grades, the International Energy Agency (IEA) said based on data from Argus and Kpler.

In response to Russia’s war with Ukraine, the G7, European Union, and Australia collectively enforced a limit of $60/bbl on seaborne exports of Russian crude oil, which was put into effect in December of the previous year.

According to Argus assessments, July’s weighted average free-on-board (FOB) price for seaborne Russian crude exports rose $8.84/bbl to $64.41/bbl. All Russian seaborne export grades sold at $70/bbl or higher by early August.

Despite North Sea Dated prices rising $5/bbl month-on-month (m-o-m), price discounts versus the marker for Russian crudes narrowed by around $4/bbl for Urals in both the Baltic and Black Sea to around -$18.75/bbl in July and just -$16/bbl at the start of August.

“Urals price strength versus the light sweet European marker reflects heightening sour grade supply tensions following OPEC+ supply cuts and a post-maintenance rise in refinery demand. Russian plans to extend export cuts in August and September have contributed to lift prices. Falling freight rates also supported FOB prices versus the delivered terms,” IEA said.

In June and July, Russian exports of crude and refined products remained around 680,000 b/d below their March-May average. With the end of Russian refinery maintenance, cuts to crude exports widened to 430,000 b/d in July  from 220,000 b/d while the 450,000 b/d fall in product exports narrowed to 250,000 b/d in July.

Prices for Urals delivered to West Coast India rose $8.64/bbl m-o-m in July to $72.73/bbl (-$8.04/bbl versus Dubai) and $80.01/bbl in the first days of August (-$5.80/bbl versus Dubai). Indian buyers now only get a discount versus Dubai of just one-third of the first-quarter 2023 level (around -$16/bbl at that time). Argus freight data indicate shipping costs for Russian Urals from Baltic ports to the West Coast of India fell by around $1.25/bbl m-o-m in July.

Despite flat overall volumes, Russian oil export revenues rose by $2.5 billion in July m-o-m to $15.3 billion, reaching their highest level since November 2022. The rebound reflects rising international oil prices combined with narrowing discounts for Russian crude and products versus international benchmarks, according to IEA data.