![The oil price cap will hurt Russian revenues, says Dan Yergin of S&P Global](https://image.cnbcfm.com/api/v1/image/107171581-16721829181672182915-27399148959-1080pnbcnews.jpg?v=1672183238&w=750&h=422&vtcrop=y)
According to analysts, Russia’s announcement of a ban on oil exports to countries that adhere to the G-7 price cap is the newest signal that we’ve entered a latest era for global energy markets.
But in addition they note that that is unlikely to have a short-term impact on oil prices as markets are driven by data and concrete actions, not words.
The price cap was introduced on December 5 and requires traders using Western services such as sea routes, insurance and financing to pay not more than $60 per barrel of Russian oil shipped by sea. According to the Finnish refining company Neste, the price of Urals oil is currently around $50 a barrel.
On Wednesday, Russia said it could stop crude oil and petroleum products for five months from February 1 for every country that complies with the limit, with a separate ban on refined petroleum products.
Dan Yergin, vp of S&P Global, told CNBC’s Squawk Box on Tuesday that despite skepticism about whether this system would work, leaders found a way to keep oil flowing to the market while reducing Russian oil revenues.
But as a result, he said, we now have a “divided, more politically charged oil market.”
“For the last 30 years, for the reason that collapse of the Soviet Union, we have had a global market where oil was largely driven by economics, the exceptions being Iran and Venezuela.”
“But now we’ve what I call a fragmented oil market, where Russian oil can not go to its biggest market, which is Europe, and the markets have been divided and that oil is now flowing east.”
![The next cycle in the oil market will be “quite strong”: RBC Capital Markets](https://image.cnbcfm.com/api/v1/image/107166641-16710809001671080898-27160647589-1080pnbcnews.jpg?v=1671151061&w=750&h=422&vtcrop=y)
Following Russia’s unprovoked invasion of Ukraine in February, European countries are scrambling to find alternative sources of oil and gas and latest energy security solutions. European Union got 14.4% of its petroleum oils from Russia within the third quarter of 2022, down 10.5 percentage points year-on-year as it increased imports from the US, Norway, Saudi Arabia and Iraq.
On Wednesday, a spokesman for the German government told Reuters that the ban imposed by Moscow “may have no practical significance” for its economy, which is the biggest in Europe.
Sophie Lund-Yates, chief stock analyst at Hargreaves Lansdown, said the ban would “add fuel to supply concerns”. As China’s reopening is ready to boost oil demand, oil prices are likely to remain elevated, she told CNBC by email.
Nonetheless, she added: “To some extent, the export ban has already been included within the price – Russia is keen to put pressure on countries that implement unhelpful policies, it is not a latest or unexpected tactic. The oil price shock we saw today just isn’t as bad as it may very well be and is probably going to calm down not less than partially in the approaching weeks.”
Bill Weatherburn, a commodities economist at Capital Economics, agreed that the immediate impact available on the market can be limited, as Russia has been threatening this move for a while.
He also said it could occur since the US and Europe had already banned Russian oil imports by sea; and the price of Urals oil continues to be below $60, so India and China can proceed importing without breaching the quota.
Boom phase
Bob McNally of Rapidan Energy Group told CNBC’s Squawk Box Asia that the EU embargo on Russian offshore oil, the oil price cap and Russia’s export ban will likely be the highest aspects affecting supply next yr, and outlined a “completely latest” scenario.
He expects 2023 and beyond to see continued volatility in oil markets. Brent crude futures are currently trading at around $84 a barrel, close to where they began the yr, but have been on a rollercoaster within the meantime, approaching $140 a barrel in intraday trading in March and surpassing $120 for barrel in June.
McNally believes the market is about to end a seven-year downturn that has been characterised by oversupply, and is on the foot of a latest multi-year boom phase where demand will likely be stronger than expected. He said this can happen amid high geopolitical and macroeconomic uncertainty and OPEC+ will struggle to rebalance the market.
![2023 is likely to be 'pretty volatile' for the oil market, says energy consulting firm](https://image.cnbcfm.com/api/v1/image/107171642-16722012511672201249-27403121757-1080pnbcnews.jpg?v=1672201778&w=750&h=422&vtcrop=y)
Russia stays the world’s largest exporter of crude oil and refined products combinedthe consequences of his latest embargo may very well be huge.
But for now, McNally argued, markets have a “boy who cried wolf” mentality after warnings that Russian supplies can be cut off in March 2022 sent prices skyrocketing but didn’t materialize.
“The market is type of comfortable with Russia, saying we’ll imagine it after we see it,” McNally said.
Russian oil exports by sea fell by about 24% on a monthly basis in December – “so it’s starting to occur, however the market will wait to see it before pricing it in and reacting,” he added.