UK minister says efficacy of Russian oil price cap must be kept under review

By Andrea Shalal

WASHINGTON (Reuters) – Britain is discussing the efficacy of a price cap on Russian oil with its Group of Seven partners given a shift in global oil prices, UK treasury minister Joanna Penn said on Thursday.

Penn, in Washington for meetings with U.S. officials and lawmakers, told Reuters in an interview that the price cap had proven successful in keeping oil markets supplied while reducing Russia’s revenues and raising Moscow’s costs for exporting oil.

But she noted global oil price swings and shifts in Russia’s response since the cap was implemented in December.

“We’ve got to keep its efficacy under review. We’ve got to think about how we can ensure that we consider how the response will evolve, and therefore how the price cap and policy should evolve in response to that,” Penn said.

Russia was forced to cut exports of oil immediately after the price cap imposition as it struggled to find enough ships to transport all of its output.

However, the country has managed to move most of its exports by domestic or non-Western foreign shippers, which do not require Western insurance coverage.

Market data show that most of Russia’s main export grade Urals has been trading above the $60 per barrel Western price cap since mid-July amid output cuts by OPEC+ producers, including Saudi Arabia and Russia.

Penn said Britain continued to honor the $60 price cap, but was discussing the “whole policy” with its partners, including the United States, and was keeping it under “constant review.”

Asked if Britain was asking for a formal review of the policy, Penn said, “A formal review around the level of the cap is one aspect of that,” she said.

Initially, the G7 agreed to review the price cap “as appropriate.” But no review has taken place since March, and four people familiar with G7 policies told Reuters this month there were no immediate plans to look into adjusting the scheme.

(Reporting by Andrea Shalal; Editing by Cynthia Osterman)