Freight wagons carrying oil and fuel at a petroleum products terminal in Riga, Latvia, on Feb. 2, 2023.
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The West’s latest attempt to ramp up its oil war against Russia may cause some market dislocation, but some energy analysts remain far from convinced that the restrictions will constitute a “transformative event.”
An EU ban on Russian oil product imports came into effect on Feb. 5, following similar restrictions on EU crude oil intake, implemented on Dec. 5. The Group of Seven wealthy countries, the European Union and Australia on Friday on Friday set a ceiling for the price at which nations outside of the coalition may purchase seaborne Russian diesel and other refined petroleum products and still benefit from Western shipping and financial facilities.
The price cap coalition, which is composed of Australia, Canada, the EU, Japan, the U.K. and the U.S., seeks to deplete Russian President Vladimir Putin‘s war chest amid Moscow’s ongoing hostilities in Ukraine.
The EU and its G-7 allies said last week that it had set two price caps for Russian petroleum products — one is a $100 per barrel cap on products that trade at a premium to crude, like diesel, and the other is a $45 cap for petroleum products that trade at a discount to the same basis.
Some analysts warned that the measures could cause “significant market dislocations” and that the EU embargo was more complex and more disruptive than what had come before.
Not everyone shares this assessment.
“There is an overwhelming assumption that this will be a huge disruption to everything. I don’t really think this will be a transformative event,” Viktor Katona, lead crude analyst at Kpler, told CNBC’s “Squawk Box Europe” on Monday.
“I don’t really think that this will have the impact that a lot of people can imagine, and the main driver for this will be actually human creativity — and the constant search for a new solution, for a new supply chain or for a new route,” Katona said.
“This will bring us basically into the same story that we had with the oil price cap back in December. People expected a lot of things. In the end, it never really happened,” he added.
‘Russia may struggle to compensate fully’
As part of the sixth EU package of sanctions against Russia that was adopted in June last year, the 27-member bloc imposed a ban on the purchase, import or transfer of seaborne crude oil and petroleum products from Russia. The restrictions applied in early December and February, respectively.
Russian President Vladimir Putin chairs a meeting with members of the Security Council via a video conference on Feb. 3, 2023.
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Asked whether those predicting significant market disruption because of the measures targeting Russia’s refined oil products were likely to be wide of the mark, Katona replied, “I think they are. I would say that the main development of the past two weeks when it comes to Russian diesel has been happening not in Europe, but…
Read More: EU and G-7 impose price caps on Russian petroleum products