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Ongoing discussions on cap system for Russian crude have led

to oil prices decrease

Barrel of crude oil, illustrative image

Oil fell more than 3.2% in August. A G7 deal to cap The idea behind the cap system was to keep a cap
Russian oil prices, under discussion for weeks now, above Russia's cost of production in order to keep
could reverse that trend, with Moscow now saying it Russian oil on the market but reduce revenues for
will retaliate by refusing to sell oil. its war chests. The cap system, which was first
Russia has finally stated openly that capping its oil proposed in June by U.S. Treasury Secretary Janet
prices would be costly for energy markets. Russia Yellen, could be set at half the Russian purchase
said it would not supply oil to countries that decide price, although the form of the final agreement and
to impose a cap on its oil prices. price level have not yet been announced.
Deputy Prime Minister Alexander Novak called the Although Russian crude is currently selling at a
idea of the G7 countries to limit the price of Russian discount of $20 per barrel, this has not reduced
oil "complete nonsense" that will destabilize the Moscow's oil revenues, as Russia has found new
entire sector. According to the minister, Russia will markets in India and China.
not supply oil and oil products to countries that According to new information, during the second
agreed with such a restriction. "We will not supply quarter, India reduced its crude imports from the
oil and oil products to those companies or countries United States by one million metric tons, while
that will impose restrictions, because we will not increasing its imports of discounted Russian oil.
work in non-market conditions," the deputy prime India's energy mix is now radically different than it
minister said. was a year ago. Last year, Russian oil's share of
He also said that Russian companies are well India's crude was around 2.2 percent, compared with
prepared for an oil embargo by the European Union 9.2 percent for the United States; today, Russia
and will do anything in their power to maintain oil accounts for nearly 12.9 percent of India's crude
production at the same level. Furthermore, Russian imports, while the U.S. share has fallen to just 5.4
production could reach 520-525 million tons by the percent.
end of the year, which is comparable to last year's
level of 524 million tons.

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