New York: Russia halts oil deliveries to organisations and governments that adhere to a price cap decided upon by Western countries on Tuesday. This temporarily increased the price of crude.
"The supply of Russian oil and oil products to foreign legal entities and individuals is prohibited if the contracts for these supplies directly or indirectly" are using a price cap, a presidential decree said. The decree will be in effect from February 1 until July 1.
It further stated that the prohibition might be lifted in specific circumstances with the approval of Russian President Vladimir Putin's "special decision."
Early in December, the price ceiling of USD 60 per barrel agreed upon by the European Union, G7, and Australia went into effect. Its goal is to limit Russia's revenue while ensuring that Moscow continues to supply the global market.
Oil prices initially increased following the news, and experts cited forecasts for more demand as a result of China's attempts to reopen markets following protracted Covid-19 restrictions, AFP reported.
By the end of the trading session, however, the majority of the gains in oil prices had vanished. Analysts have pointed out that Moscow's action won't prevent deliveries to China, India, or other importers that choose not to sign on to the price restriction.
The Russian action "should not come too much as a surprise for the market really, given what we heard from them over the recent months," said Matt Smith of Kpler.
"It'll tighten things up a bit, but not too much."
Brent oil futures for February delivery finished 0.5% higher at USD 84.33 a barrel. West Texas Intermediate, the US benchmark for oil, fell less than 0.1% to USD 79.53 a barrel for delivery in February.
The restriction, which was introduced concurrently with an EU embargo on seaborne exports of Russian crude oil, intends to prevent Russia from getting under the embargo by selling its oil to third parties at exorbitant prices.
According to Russia, the cap won't have an impact on its military campaign in Ukraine, and that new buyers will certainly come forward.