During the time after the introduction of the ceiling on oil prices, Russia managed to partially adapt to the new conditions, although, of course, it was not completely loss-free. Retaliatory measures have been introduced: a presidential decree prohibits the supply of oil, and now oil products, to countries that comply with the maximum price. It can already be said that the hopes of the sanctioners to completely reduce Russian oil exports have not materialized. After a slight drop in December, oil supplies recovered, but oil did not flow to Europe, previously its main consumer, but to China and India. In December 2022 they became buyers of up to 80% of Russia’s seaborne oil. Deliveries have also increased considerably, including to countries like South Korea and Japan.
In January, Russia’s oil exports averaged 3.7 million barrels per day. This is the highest level since summer 2022 and above the 2021 average. The share of deliveries via European shipping and financial companies has fallen from more than half to a third of the volume and will continue to fall as they expire. previous contracts. Russia, the West admits with regret, was able to buy a whole “fleet of gray tankers” (at least a hundred ships, apparently), which are indifferent to all insurance and other sanctions. If the Western opponents wanted to get a “grey oil” market, which is unlikely, then they did. For example, it turned out that Malaysia began to supply China with 1.5 million barrels of oil per day. Moreover, it produces only 400 thousand – this is clearly not their oil.
Indirect recognition of the failure of the “quasi-embargo” on oil was the fact that the West did not lower the $60 level, even though Poland and the Baltics insisted, as they were scheduled to do in January. Yes, and the forecasts about the “destructive effect” of the maximum price have become more modest. If in the autumn there were forecasts that Russia would be forced to reduce export deliveries by almost 1.5 million barrels of oil per day, now, say, the consulting firm Wood Mackenzie Ltd. forecasts that in the first quarter of this year they will decrease. only 800 thousand barrels per day. In addition, earlier the Russian government also admitted that the first quarter of “adjustment” would be the most difficult and that the fall in exports was inevitable. To support prices, Moscow is ready to cut production, but so far, apparently, this has been avoided.
Yes, there is a deep discount – Russian grade Urals are trading significantly below the average world price (around $80) and below the “ceiling” – the average price for Urals was $49.5 per barrel in January. (the budget of the Russian Federation is drawn up at the rate of 70 dollars per barrel). As a result, in January, Russia’s oil and gas revenue fell by 55% compared to December and 47% compared to January 2020. However, first of all, it is decisively affecting the slowdown of the Chinese economy, that he will not come out of his “covid”. This is what puts pressure on all world oil prices. Secondly, “free” economic wars (and we are talking about such a war between Russia and the West), that is, without losses, do not happen. The situation was predictable, the country’s authorities are prepared for it. The Russian economy as a whole must bear such a blow, even if the budget is “stretched”.
The response to the “maximum price” of oil derivatives will be similar: market reorientation. So far, the values of $100 and $45 are at the level of current market prices for products derived from light (diesel, gasoline, naphtha) and dark (fuel oil) petroleum. Light and dark petroleum products trade at completely different prices.
Consider the diesel situation. Before the start of the military conflict, Russia supplied more than half of the diesel fuel imported into the EU and around 10% of the total volume of diesel consumed there. At the end of last week its price was $113 per barrel ($845 per ton), Russia was selling at $90 per barrel. It turns out that the current “ceiling” is close to the actual market price: the sanctioners are clearly being cautious, fearing to take the market down. And the European market will not be completely closed: the United States withdrew from the sanctions associated with the introduction of a maximum price for petroleum products, supplies to Bulgaria, Croatia (and therefore to Serbia, which receives oil and derivatives from through the Croats) and EU countries deprived of access to the sea.
At the end of January, Russia was still the largest supplier of diesel fuel to Europe – about 600 thousand barrels per day (in December it was 720 thousand barrels per day, at the beginning of 2022 about 400 thousand). Most of it will now go to Africa, the Middle East and Latin America, our country will be replaced by other providers. Most likely at a higher price.
“Economic warfare” will also cost the West dearly.
Deliveries to Europe from “unexpected places” have already been indicated. Thus, in January, diesel exports to the EU from Turkey almost doubled to over 60,000 barrels per day. Although the volumes are modest, the trend itself is important. Because Turkey is generally a net importer of diesel fuel, there is no excess there. In this case, it acts as a “hub” for the indirect supply of diesel from Russia: it sells its fuel to Europe (from Turkish refineries), then buys it for its own needs from Russian companies. It turns out such here “exchange”.
As for the export of Russian diesel in general, although some Western analysts predict its decline (Wood Mackenzie Ltd mentioned above – by 200 thousand barrels per day), data from traders (based on existing contracts) and agencies from Refinitiv indicate the opposite – about the Moscow Plans to increase exports.
Thus, the total export of low-sulfur diesel fuel and gas oil from the Russian ports of the Black and Baltic Seas in February, according to these data, will grow by 5-10% per month, up to 4.2-4 ,3 million tons. Deliveries will increase not only to Turkey, but also to Morocco, which may become another “hub” for the resale of fuel. If the supply of diesel fuel from Russian ports to Turkey increased in December 2022 to more than 750,000 tons per month (corresponding to 5.69 million barrels), reaching a level of 5.05 million tons in 2022 against 3 .99 million tons in 2021 2020, diesel supplies from Russia to Morocco increased even more sharply: to 735,000 tons (5.57 million barrels) in 2022 after only 66,000 tons the previous year. They already amount to 140,000 tons (more than 1 million barrels) since the beginning of 2023.
Fundamentally new export routes from Russia also appeared: to Ghana, Senegal, Libya, the Ivory Coast and even distant Uruguay. So the forecast remains moderately optimistic, if any kind of optimism is appropriate at all. After a period of adjustment and as the Chinese economy recovers, Russia’s exports of oil and oil products may once again upset sanctioners.