The Russian oil cap has created a discounted price in global oil markets. Probably not sustainable under $70 a barrel. All eyes on Russian and OPEC response.

Chart 1

(Chart 2)

The European Union (including the U.S. and Australia) oil cap on Russian exports have been implemented at $60 per barrel, which is less than what I speculated would be between $65 and $75.   So, $60 is a large artificial discount on oil exports out of Russia.   China has been buying up oil, to which it does not abide to Russian sanctions,  reported to have negotiated the oil price to $68.  Which shows the Russian bargaining power with its oil will struggle even with its friendly country's that it exports too, who on these price caps are going to take advantage of the discounted market price.   The cap will probably have the desired effect in reducing Russian oil profits, but will not lower the oil price below $70.   For the following reasons:

    1.  President Joe Biden's massive Strategic Petroleum Release of this year, sent emergency stockpiles down to 5 year lows (refer to Chart 1).   Testament to the generally low levels of oil stocks across America, which also includes diesel fuel.   The slight up tick in stockpiles of oil, would be the lower buying price of which the White House has begun in replenishing its depleted SPR stocks.   The oil price bounced off $70 now bid over $72.

    2.  Russia at some point will cut production in conjunction with OPEC, more so Saudi Arabia who may want to see a return to $80 per barrel.

    3.  A global recession will not send oil lower, rather since stagflation is now becoming imbedded.  What will occur is very 1970's stagnated economy, but far worst and prolonged throughout 2023.  Eyes on the Northern Hemisphere late winter which could last well into 2023.

Current oil price is $72 since bouncing off lows of $70.  With the possibility of the price entering November 2021 trading range of $69 and $72.  These are still inflationary prices.   (Refer to Chart 2.)