Allianz chief economic adviser and noted economist Mohamed El-Erian has highlighted the fact that although the discount on Russian crude oil relative to Brent crude will increase following Western sanctions, it is still unclear where the absolute prices would be headed.
“Assuming the gap is measured well going forward, the latest western sanctions on #oil exports from #Russia should be expected to increase the discount on Urals relative to Brent and other world prices. What is harder to anticipate is where the absolute level of both will settle,” El-Erian tweeted.
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The economist’s comments come in the backdrop of the Group of Seven nations agreeing to put a price cap of $60-per-barrel on Russian crude oil with the European Union deciding on the same price. As per the new consensus, the cap will ban companies from shipping, insuring, or financing Russian oil unless the oil is sold below $60 a barrel.
Russian President Vladimir Putin's point man on energy and Russia’s Deputy Prime Minister Alexander Novak has said even if the country has to trim production, it will not sell oil subject to a Western price cap.
Price Action: Oil prices declined over 3% on Monday, following the downward trend in the U.S. stock markets, after strong non-manufacturing PMI data raised concerns that the Federal Reserve could continue its aggressive rate hike path.
The United States Brent Oil Fund BNO closed 3.18% lower on Monday while the Vanguard Energy Index Fund ETF VDE closed 3.24% lower.
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