EU and UK tighten Oil Price Cap

This week, the European Commission and the UK Government’s Office of Financial Sanctions Implementation (OFSI) announced a coordinated reduction of the Oil Price Cap (OPC) for Russian seaborne crude and petroleum products.

Under current rules, seaborne Russian crude oil and petroleum products are only permitted for import if they are priced at or below the cap. This restriction also covers essential services such as maritime transportation, brokering, and financial services. While the OPC was originally a G7+ initiative, the coalition has shifted following the withdrawal of the United States. Despite this change in international participation, EU and UK firms must maintain strict vigilance and adhere to the new requirements.

The New Price Levels

From 1 February 2026, the price cap will be reduced to USD $44.10 per barrel. For UK firms, this change takes effect at 23:00 on 31 January to account for the one-hour time difference with the EU.

A transitional period of 90 days is available for existing contracts concluded before 15 January 2026. This period runs until 16 April 2026 (ending at 22:59 in the UK).

A New Dynamic Mechanism for the EU

The EU has introduced a new mechanism to ensure the cap remains effective. This system keeps the OPC at least 15% lower than the average market price for Urals crude, based on a 22-week reference period. The current $44.10 figure was reached using price assessments from Platts and Argus for the period between July and December 2025.

While the EU will update this notice every six months, the UK has not implemented a dynamic mechanism. Instead, the UK has updated its guidance to reflect the new fixed cap and transitional arrangements.

Action for Compliance Teams

As the EU moves toward a total ban on Russian oil and gas, firms must ensure their internal controls are updated immediately. We recommend taking the following steps:

• Internal Communication: Ensure the Front Office is fully aware of the $44.10 cap and the specific implementation deadlines.
• Time Zone Coordination: Carefully manage the one-hour difference between UK and EU jurisdictions to avoid accidental breaches.
• Future Planning: Mark 26 July in your compliance calendar, as this is when the EU is expected to publish the next price update.

Maintaining robust compliance remains essential for all firms operating in these markets.