U.S. Price Cap Fears as Russian Oil Dips Below $40
The United States and Western countries have been in turmoil for several months and have finally managed to bring the price cap to the forefront.
It has been implemented for a month now, but it seems that it is far from achieving the goals that the United States had anticipated.
The U.S. is well aware that the more countries and regions that participate in the price cap, the better the effectiveness of the cap. However, the reality is that several major oil-consuming countries in Asia have not participated, especially India, which has explicitly rejected the price cap and continues to import increasing amounts of Russian crude oil despite the pressure.
Conversely, the U.S. price cap has inadvertently created a rare opportunity for other countries, not only to purchase crude oil but also to develop opportunities in related industries.
01, Oil Prices After the Price Cap
The U.S. price cap had been determined for implementation in August or September, but the specific price limit was difficult to finalize.
After much negotiation and maneuvering, the export price of Russian crude oil was hastily capped at $60, and the implementation began in early December.
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In the first week after its introduction, international crude oil prices fell, with WTI crude oil prices dropping from $82.7 to $71, demonstrating the power of the price cap.
However, unexpectedly, in the following three weeks, international crude oil prices rebounded from their lows and continued to rise, with WTI crude oil prices once again surpassing $80 per barrel.
Then, last week, oil prices fell again, retreating to around $75.It appears that international crude oil prices are highly volatile, but it's difficult to say that this is entirely due to the impact of price caps.
02, The Failure of Price Caps
In reality, for the United States, imposing a maximum limit on the export price of Russian crude oil is primarily aimed at maximizing its own interests. If it were of no benefit to itself, the U.S. would not invest so much effort and resources.
Recently, the price of Russian Urals crude oil is only around $38, already below $40, and far below the $60 required by the price cap.
Since Russian crude oil is already so cheap, the significance of price capping seems rather minimal.
For the U.S., the main hope is that after Russia's energy no longer exports to Europe, Europe will be forced to purchase more energy from the U.S.
Compared to two or three decades ago, there has been a tremendous change in U.S. energy. From the 1970s and 1980s, when the U.S. needed to continuously import energy from the Middle East, to the last 10 to 20 years, when the U.S. energy gradually became self-sufficient, and to the last 5 to 10 years, when U.S. crude oil and natural gas could be exported abroad.
This significant change has also prompted a massive shift in U.S. strategy.
After the conflict erupted, Europe could no longer import oil and natural gas from Russia, which allowed the surplus energy of the U.S. to find a natural and vast market. Precisely because of this, the U.S. has spared no effort in continuously promoting rounds of bans and sanctions.
However, Russian crude oil continues to be exported, and the price is far below the price cap. It seems that the U.S. plan to dump energy onto Europe has failed.03, India's Shopping Spree
In the process, India has found a great way to make money.
India is a country that is already more than 80% dependent on imported energy. Since last year, Russia has been willing to offer India good discounts, with the highest discounts reaching $35 per barrel.
This is undoubtedly good news for India, as international oil prices continue to rise and remain at high levels, India has obtained a stable source of discounts.
And for India, there is even better news, that is, after importing crude oil from Russia and processing it appropriately, the finished or semi-finished products can be resold to Europe. Not only are they not subject to price limit restrictions, but they also have a higher profit margin.
In addition to India, many countries have also started to focus on the market gap left by Western countries after they withdrew, providing maritime and financial services to countries purchasing Russian crude oil under the price limit order.
Perhaps for the corresponding industries, this is a rare opportunity to seize the market share left by Western countries.
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