EU Considers Freezing $44.10 Russian Oil Cap to Curb $65 Spike
CL•The EU is considering freezing the $44.10 per barrel cap on Russian Urals crude to avoid an increase to at least $65 in July due to Middle East–driven price spikes. Options include suspending cap adjustments until year-end or capping the threshold at $60 as part of its 21st sanctions package.
1. Current Price Cap Framework
The EU’s dynamic mechanism sets the Russian Urals crude cap at 15% below its average market price, resulting in the current $44.10 per barrel threshold. This cap automatically resets every six months, with the next scheduled review in July.
2. Proposed Cap Freeze Options
Officials are weighing three alternatives: maintain the $44.10 cap, suspend any adjustments until year-end, or allow a one-time increase but cap it at $60 to prevent a jump above the Group of Seven’s previous $60 limit.
3. Drivers of Price Surge
Escalating tensions in the Middle East and disruptions in the Strait of Hormuz have pushed global crude prices higher, raising concerns that the automatic formula would lift the cap to at least $65 per barrel in July.
4. Broader Sanctions Package
The oil cap proposal will join the EU’s 21st sanctions package, which may include new measures on banks, oil traders, refineries, cryptocurrency operators, shadow fleet vessels and potential restrictions on liquefied natural gas shipments.
