Exported Russian Urals crude oil is trading at about $38 per barrel, well below the $60 price cap, but experts believe this drop is due to a weakening global market rather than the impact of sanctions, writes Business Insider.

According to Yale University researcher Gregory Brew, about a month after the European Union and the G7 set a $60 price ceiling on Russian oil, Urals is trading at about $38 a barrel, which has more to do with demand in China than with sanctions.

There is currently a lot of uncertainty around the world about the global economy and China’s zero tolerance COVID-19 policy, causing even the price of Brent crude, the international benchmark, to hover just below $80 per barrel.

The price of oil is still based on demand, not on the West’s reaction to Russia’s moves. It’s not about how much oil Russia can produce, or how much the West can cut Moscow’s revenues, but rather about the global market, which depends on China’s plans and that country’s recovery in fuel demand, which will ultimately put maximum pressure on oil prices.

As for Russia’s response to the oil price ceiling, it has officially refused to comply with the price cap mechanism and said it is ready to retaliate by, for example, cutting oil production. UBS analysts have warned that oil prices could rise above $100 per barrel this year, but as demand in China remains low for now, so prices will not rise.