The G7 group’s price-capping measures taken to restrict Russia’s oil revenues will not target OPEC, a United States Treasury official told Reuters on Wednesday, although the gesture may do little to tamp down the animosity between the United States and OPEC.
The United States communicated this fact to OPEC to reassure them that any price-capping action wouldn’t be replicated in response to OPEC’s production cuts.
Tensions have grown between the United States and OPEC—particularly Saudi Arabia—since the most recent OPEC+ meeting, where the group decided to cut production targets by 2 million bpd, despite intense lobbying by the United States to delay any production cuts.
Saudi Arabia said that the actual OPEC+ production cuts for November would come in somewhere near 1 million bpd, with some members already underproducing the new target. The United States have claimed that the production cut would further line Russia’s pockets with oil money by driving the price of oil upward.
Although prices did rally following the OPEC+ meeting, they have since come back down. But tensions between Saudi Arabia and the United States have not.
The G7 agreed to a price cap in September, with the EU agreeing in October. The details of a price cap still need to be hashed out, and the G7 invited all countries to provide input on the design of the price cap, looking to have “a broad coalition in order to maximise effectiveness and urge all countries that still seek to import Russian oil and petroleum products to commit to doing so only at prices at or below the price cap.”
Bloomberg suggested that White House officials were concerned that a price cap on Russian crude oil could lead to a rise in crude oil prices after the OPEC+ decision, which increased oil market volatility.