This week has seen Oil drop to prices unimaginable of those in comparison to the peaks that were 20% higher, at times, throughout the year.
As of Thursday afternoon, Spot Brent Crude was trading at $78 USD bbl and WTI Crude at $ 74 bbl.
Oil prices slumped following the introduction of the embargo because traders had already factored in both the EU punishment and the G7 price cap, and had concluded they, especially the cap, will not have much of an immediate effect on the availability of Russian oil. The implementation of this price cap bans maritime transportation services for Russian crude oil unless the oil is sold at or below $60 per barrel.
Concerning the supply-side regulatory effects that the embargo may have, there is mounting pressure on the markets about speculation of oversupply. But, contradictions continue, as there is a greater demand in China, as it has been “suppressed by a million and a half barrels per day. So fact one is the market remains undersupplied”.
China has continued to ignore the price caps imposed by western countries on Russian oil, even with weak demand due to its volatility with its Covid-19 Policies.
However, a stark reminder from fund manager Eric Nuttall has reiterated to those watching oil prices that whatever else happens, the world remains undersupplied with oil, suggesting prices may yet rebound and for people to remain vigilant.
The Greek shipping giant, Nicolas Vernicos, seemed unfazed when talking about the oil price cap. He told the French Liberacion News, “Transport costs, which are already skyrocketing, will rise even faster!” and that “boycotts have the consequence of driving up the prices of goods imported or exported from the embargoes country” when questioned on the G7 and EU price cap on Russian oil.