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Oil prices fall more than 3% as G7 debates Russia’s oil cap

running out of oil 3.2% or more That trend as Moscow now says it will retaliate by refusing to sell oil while a pending G7 deal to limit Russian oil prices is being discussed on Thursday can be reversed.

Russia finally showed up and openly declared that oil price ceilings would be costly for the energy market.

In a statement Thursday continued Kommersant.ruRussia said it will not supply oil to countries that have decided to impose caps on their own oil.

Deputy Prime Minister Alexander Novak called the idea of ​​G7 countries limiting Russia’s oil prices “absolute absurdity” destabilizing the entire industry.

According to the minister, Russia will not supply oil and petroleum products to countries that support the establishment of such restrictions.

We do not work in non-market conditions and therefore do not supply oil or petroleum products for companies or countries that impose restrictions.‘ said the Deputy Prime Minister.

Novak further said that Russian companies are well prepared for the European Union’s oil embargo and will succeed in maintaining the same level of oil production.According to Novak, the Russian [production by year-end could reach 520-525 million tons comparable to last year’s production of 524 million tons.

The cap scheme, which was first brought to the table in June by the U.S. Treasury Secretary Janet Yellen, could be set at half of the Russian purchasing price although the shape of the final deal and price level have yet to be announced. The initial idea was to maintain a cap above Russia’s cost of production to keep Russian oil on the market but reduce revenues for its war coffers.  

On Wednesday, Yellen said she was “optimistic” that the G7 would come to a price-capping agreement. She also met with UK Chancellor of the Exchequer Nadhim Zahawi, who has offered British support for the plan, but noted that to be more effective, the plan would require more countries to come on board. 

While Russian crude is selling at a $20/barrel discount now, it has not worked to stymie Moscow’s oil revenues thanks to Russia finding new markets in India and China. 

New reports have emerged that during the second quarter, India slashed its crude imports from the United States by one million metric tonnes while sharply ramping up imports of discounted Russian oil. India’s energy mix now looks dramatically different from a year ago. Last year, Russian oil in India’s crude basket amounted to a paltry 2.2%, while the U.S. was 9.2%; right now, Russia accounts for nearly 12.9% of India’s crude imports, while the U.S. share has tumbled to just 5.4%

By Alex Kimani for Oilprice.com

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