Source: Wall Street
The tight supply and demand crude oil market cannot afford to go wrong, and industry insiders warn that the "price limit" will pose a real risk and that some companies may "retreat".
The $60 Rosneft ceiling will be officially implemented next Monday. In response, Russia warned that it would not sell crude oil to any country that signed the price cap.
At a time when demand in the global crude oil market is extremely inflexible, the market fears that even a lack of hundreds of thousands of barrels of supply could lead to market imbalances that could lead to a surge in oil prices.
In the face of concerns, the US government hastened to appease, stressing that the entry into force of the price cap would not cause supply disruptions and price fluctuations.
On Friday, a senior Treasury official said that setting a price cap is unprecedented.But the United States strives to deal with this problem by making extensive contacts with the industry before the implementation of the price limit.
And in response to the argument that "banks and other institutions may choose not to participate because of concern that the risk is too high," the US Treasury official said that although some companies will withdraw from the Russian market because of excessive compliance with sanctions.But the situation for energy companies will be different. After all, crude oil is vital to the global economy.
Helima Croft, chief commodities strategist at Royal Bank of Canada Capital Markets, said it would take some time for shipping companies and trading companies to understand compliance issues, according to the media.
It is unclear how the price cap and related sanctions will be implemented next Monday. What I want to know is whether we will be disturbed in the short term, and the legal department is working on whether it is possible to trade.
Hunter Kornfeind, an oil market analyst at Rapidan, a leading energy consultancy, said lawyers were still likely to prove that the EU's rapid implementation of price caps would cause problems:
This is a real risk. When some buyers are on the sidelines rather than transferring oil reserves, it can lead to a trough that can last for weeks. This is not to say that the whole deal will stop, but some people may choose to step back.
Edit / roy