Oil price developments and Russian oil flows since the EU embargo and G7 price cap

This box provides initial evidence of the impact on global oil markets and Russian oil flows of the EU embargo and the G7 price cap on Russian oil imposed in response to Russia’s war of aggression in Ukraine. Overall, international oil prices have declined amid resilient supply from Russia and lower global demand, despite the expected rebound of the Chinese economy. After some initial bottlenecks, Russia managed to redirect most of its crude oil exports from Europe to Asia, but only by continuing to offer significant price discounts relative to global prices. However, a stronger impact on global oil markets could still materialise, particularly as, since February, Russia has officially prohibited sales of crude oil to countries that adhere to the price cap mechanism. In addition, the sanctions on refined oil products are only in the early phase of implementation, with initial evidence showing that Russia is partly redirecting those flows towards Africa and unknown destinations while, in the absence of Russian imports, the European diesel market remains tight. JEL Classification: E21, E32