Russia’s crude price exceeds G7 price cap as market braces for supply crunch
View of Russian oil port Novorossiysk.
Алексей Облов | Moment | Getty Images
Spot prices of Russia’s crude oil this week surpassed the $60-per-barrel threshold of the Group of Seven’s oil price cap scheme, as Moscow and Riyadh tighten supplies.
The G7 introduced its oil price cap mechanism on Dec. 5 to retain Russian flows in the market while also limiting revenue for the Kremlin’s war coffers.
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EU imports of Moscow’s crude were banned that same month. Under the G7 scheme, Western shipping and insurance providers can offer services to non-G7 buyers of Russian crude if the crude oil is acquired at a price below $60 per barrel.
Prices for Russia’s main export crude — the heavy-sulfur, “sour” Urals that loads from the Primorsk, Ust-Luga and Novorossiysk ports — this week exceeded that threshold for the first time since the price cap mechanism was implemented.
Spot assessments from commodities pricing agency Argus show that Urals prices on July 12 reached $60.18 and $60.78 per barrel for Primorsk and Novorossiysk-loaded cargoes, respectively. S&P Global Platts meanwhile valued Primorsk cargoes at $60.32 per barrel on July 11 and Novorossiysk Urals crude at $60.26 per barrel on July 12.
Several crude oil traders — who spoke to CNBC anonymously because of contractual restrictions — attributed the spot Urals price increase to underlying hikes in global oil prices, as Ice Brent futures with September expiry settled above $80 per barrel on July 12. The latest Thursday disruptions in Libya have sustained this level.
The Organization of the Petroleum Exporting Countries and the International Energy Agency forecast surging demand in the second half of the year.
On supply, some members of the OPEC+ group — comprising OPEC and its allies — are implementing 1.66 million barrels per day of voluntary production cuts until the end of 2024. Crowning this, Saudi Arabia announced an extra unilateral decline of 1 million barrels per day in July and August, while Russia committed to cut exports by an additional 500,000 barrels per day next month.
“With less supply from OPEC+ during the demand-heavy summer months, we expect larger oil inventory declines to become visible and support oil prices,” UBS Strategist Giovanni Staunovo said in a Thursday note.
Urals values also rose as “an ongoing impasse between Turkey and Iraq, blocking some 450,000 b/d of sour Kurdish crude flow via Ceyhan is supporting sour crude values,” S&P Global Commodity Insights told CNBC by email.
Lower U.S. inflation has lightened some of the macroeconomic concerns that have been weighing on the crude complex over the year.
“The US Fed may now be able to scale back its program of interest rate hikes, even if they’re still likely to proceed with a hike in July. That has already begun to weigh on the US dollar while at the same time allowing a rally in equities. Finally, we had some pretty chunky Chinese commodity import data today for June, not least strong crude imports,” Argus Chief Economist David Fyfe said by email.
Quality over quantity
Sour crude demand has itself surged, with dwindling refinery stocks no longer cushioning the impact of lower output, one trader told CNBC. Prices for Urals crude alternatives available, such as Norway’s Johan Sverdrup and Libyan Es Sider, have spiked as a result, other traders said.
“Most Russian crude is at the heavier end of the spectrum, similar to a lot of Middle Eastern oil. Since a lot of Asian oil refineries were built to use higher density ‘heavy’ Middle Eastern material, and that is now in shorter supply because of OPEC, Russian crude has become more valuable to buyers in India, China and the rest of Asia,” said Argus Global Head of Editorial Neil Fleming.
A one-time breach above $60 per barrel for Russian crude prices might not prompt changes to the scheme price ceiling, two traders said, as G7 regulators will likely wait to see if a trend coalesces. One suggested it could push Washington to consider another crude release from strategic petroleum reserves (SPR) to mitigate price hikes, though currently low U.S. inflation might deprioritize that.
“The G7 notionally reviews the price cap every two months, with the IEA asked to provide an assessment of Russian export levels and revenues,” Fyfe said, adding that the bloc had so far been loathe to “upset the dynamic” of leaving Russian crude available while narrowing Russian revenues.
Two traders said that the hike above $60 per barrel would largely impact shipping and insurance arrangements from the so-called “grey” fleet — oil tankers, including Russian-bought vessels, that transport Russian crude bought within the confines of the G7 scheme. Another delivery alternative, they said, is the “dark” fleet — vessels that take Russian crude without investigating its purchase price and sometimes shut off their devices that emit position signals during delivery.
Russian crude and refined oil exports are already under pressure, the International Energy Agency estimated in its latest report Thursday, losing 600,000 barrels per day in June. Moscow’s export revenues sank by $1.5 billion to $11.8 billion last month, halving from the same period of last year, the IEA found.
Some Russian crude transport is unlikely to be impeded. Supply heading to key buyer India is largely insured by non-Western providers and overwhelmingly carried on Russia’s own fleet, says Kpler Lead Crude Analyst Viktor Katona.
“In case some Indian buyers become wary of transactional risks, the most likely change this is going to bring about is a change in currency. Up until now, most payments were made still in dollars, could be switched to UAE dirhams for instance (yuan would be the politically less palatable option for Indian refiners even if it, too, would provide some sort of stability),” he told CNBC.
After years of waiting and many false starts, Formula E is finally going to debut its mid-race charging system, which will give cars a quick boost of energy charging at a rate much faster than current road cars can.
For years now, we’ve been hearing about FIA plans to introduce charging stops to electric racing.
In gas car racing, some series allow mid-race fueling and some don’t. The World Endurance Championship, which runs the 24 Hours of Le Mans, obviously needs to fill up several times during the race. But Formula 1, which hosts shorter races, eliminated mid-race fueling in 2010.
Plans to bring mid-race charging to Formula E started in 2021, when the FIA started kicking around plans for an Electric GT racing series with 700kW charging.
But the FIA already had one electric racing series, Formula E, which had debuted in 2014. At the time, each driver had two cars, and would swap mid-race to a fresh car with new batteries.
Battery-swapping had been considered, but it would be too complicated to set up at temporary race facilities in city downtown areas, as many Formula E tracks are.
Then, in 2018, Formula E debuted a new “Gen 2” car which had a big enough battery not to need a charge mid-race, and later a “Gen 3” car in 2022, which had much stronger regenerative braking, capable of 600kW of braking power. Gen 3 also has an “Attack Mode” feature that lets cars unlock additional power for a short period each race, adding to strategy and mixing up the race order.
That 600kW charging ability could also be used for mid-race charging, so Formula E said that it was working on a system to allow for this. It announced that mid-race charging would come at some point in the 2023 season, but then pushed back those plans until 2024, and pushed them back again, this time with an uncertain date.
The issues involved building the charging system in temporary facilities and ensuring safety of the system (and of pit stops in general, which is always a concern when cars are driving rapidly near people). But after winter testing prior to this season, Formula E now says the system is ready to go.
So, once again, Formula E is ready to announce that mid-race charging is definitely, totally, positively, 100% certain at the upcoming Jeddah E-Prix, on February 14-15 in Jeddah, Saudi Arabia.
Formula E thinks that proving this high-power charging technology could help road cars to charge more quickly, which could have myriad benefits for electric cars in general.
The series is calling the system “Pit Boost,” and it will consist of a 34-second pit stop that provides around 10% additional charge to the cars (about 4kWh). While 10% isn’t a lot, 34 seconds is also not a lot of time. For comparison, one of the fastest-charging cars out there, the Ioniq 5, can charge from 10-80% in 18 minutes, which means 10% charge takes 2.5 minutes – five times as long as Formula E cars will manage the feat.
The stop will be mandatory for all drivers to take at some point in the race, and will mean new strategy options for drivers. Taking the stop means getting more energy, which means that your car won’t have to do as much energy saving to get to the end of the race – but it also means giving up your position on track, which can be hard to get back if you do it late in the race.
However, we’ve never seen it happen before, so it will be interesting to see what kind of strategic options develop.
If you’re interested in seeing how it turns out, tune in to the Jeddah E-Prix on February 14-15 to see what happens. It’s a doubleheader race weekend, with night races both on Saturday and Sunday, February 14-15, at 5pm UTC, 9am PST, 12pm EST, and 8pm local time. You can check out how to watch the race in your area by going to Formula E’s “Ways to Watch” section. In the US, Roku should be the most reliable way to watch.
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JackRabbit, the maker of pint-sized electric microbikes, is back with a new product designed to quickly recharge their batteries from pure, uncut photons mainlined into an e-bike directly from the sun. In true independent charging form, the Solar Charging Kit from JackRabbit keeps riders rolling even when there’s not a convenient AC outlet in sight.
Unveiled this week, the Solar Charging Kit consists of a single folding solar panel and a tiny voltage converter that is configured to output 42.0V, which is the exact voltage required by JackRabbit’s little e-bike batteries. There’s also an added USB-A and a USB-C charging port for powering other devices in addition to charging JackRabbit batteries.
“This Solar Charging Kit plugs directly into your bike,” explained the company, “letting you recharge without needing an outlet, but with a speed comparable to the charger that comes with the OG/OG2 (42V, 2A).”
That would mean the panel outputs around 80W of solar power, which the company says can recharge its batteries in just three hours. That fairly quick recharging speed is helped by the fact that JackRabbit’s batteries are a mere 151 Wh, or around a third of the size of most e-bike batteries.
If that sounds small, then you’re right – it is. But JackRabbit is all about going micro, offering barely 25 lb rideables that are easy to store and bring on adventures, even when they aren’t actually being ridden.
With small batteries that fit under the 160Wh limit for many airlines in the US, the batteries can be quickly charged and taken to the widest number of locations. And for riders that want to go further than a single 10-mile (16-km) battery will allow, extra batteries are small enough to fit a pants pocket. The company also offers much larger Rangebuster batteries, though they won’t pass by TSA and make it onto an airplane in your personal item.
It sounds like the Solar Chargking Kit should be able to charge up JackRabbit’s large RangeBuster batteries, though likely in more than three hours.
The $349 Solar Charging Kit is a bit pricier than building something similar yourself, but it’s also safer and more convenient than hacking together your own battery charger since it’s designed to work with JackRabbit’s batteries right out of the box.
Technically it’s only inteded for JackRabbit’s micro e-bikes (themselves technically seated scooters, even if they look and feel more like a typical bike), but it’d probably work for just about any 36V e-bike that requires 42.0V to charge.
This isn’t the first time we’ve seen solar charging kits for electric bikes, and it’s a trend that is certainly appreciated by outdoors and camping enthusiasts, festival goers, or anyone who finds themself and their bike spending extended periods in the great, sunny outdoors.
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