An EU diplomat told Reuters on Thursday that the EU has made a provisional decision to fix the price restriction on Russian crude oil at $60 per barrel. However, Poland, which had advocated cutting Russian crude oil prices to the lowest level possible, must first approve the agreement before all EU countries can sign it by writing by the deadline on Friday.
On Thursday, the U.S. sent a warning to the EU saying that the recent price of $52 for Urals crude oil might not accurately represent the price at which Russian oil has been trading. According to an unnamed U.S. official, the price of Urals has been trading higher than the $52 mentioned by various media, at a discount of $17 to $23. The target has been suggested to be set at $8 higher by the EU.
Although those levels were disregarded as having very little chance of being supported by other EU members, Poland, Estonia, and Lithuania have all expressed their opinion that the price cap on Russian crude oil insured and shipped by Western companies should be set at much lower rates — $20 to $30 per barrel, Russia’s production cost.
The current EU proposal is substantially higher than what Poland, Estonia, and Lithuania initially requested. Should one or more of them disagree, the embargo on Russian maritime imports will go into effect as of next Monday, December 5.
An embargo would inevitably increase the cost of crude oil for European consumers under the normal market scenario. However, the price cap would help to reduce this price increase, which is why the US has backed the proposal and warned the EU not to make the cap too low so that they cannot reach an agreement.
The other concern is whether or not Russia will continue to export its crude oil if the price is capped, and if so, how much would crude oil prices increase as a result?