Oil prices little changed as Russia unveils export ban

President Vladimir Putin signs a decree that bans the sale of oil to EU and G7 countries

An oil tanker moored at the Russian port city of Novorossiysk. Moscow says it is confident it will find new markets. AP

Russia banned oil sales to countries and companies that have complied with a price cap agreed on by western nations, briefly helping to lift crude prices.

“The supply of Russian oil and oil products to foreign legal entities and individuals is prohibited if the contracts for these supplies directly or indirectly” are using a price cap, a presidential decree said on Tuesday.

The decree will be effective from February 1 to July 1.

It said the ban may be lifted in individual cases, on the basis of a “special decision” issued by Russian President Vladimir Putin.

The price ceiling of $60 a barrel agreed on by the EU, the G7 and Australia came into force in early December and seeks to restrict Russia's revenue while making sure Moscow keeps supplying the global market.

Oil prices initially jumped on the announcement and analysts pointed to expectations of stronger demand due to the reopening of China after lengthy Covid-19 restrictions.

But most of the gains in oil prices had disappeared by the end of the trading session.

Analysts have noted that Moscow's move will not impede deliveries to India, China and other importers that did not join the price cap.

The Russian action “should not come too much as a surprise for the market really, given what we heard from them over the recent months”, said Matt Smith of Kpler.

“It will tighten things up a bit, but not too much.”

Brent oil futures for delivery in February ended 0.5 per cent higher at $84.33 a barrel while West Texas Intermediate for delivery in the same month slipped less than 0.1 per cent to $79.53 a barrel.

Introduced alongside an EU embargo on seaborne deliveries of Russian crude oil, the cap aims to ensure Russia cannot bypass the embargo by selling its oil to “third countries” at high prices.

Russia said in the past that the cap would not affect its military campaign in Ukraine and expressed confidence that it would find new buyers.