Sanctions against the Russian oil industry are highly overestimated

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave an interview to the Neft and Capital Internet portal about the results of the year and the immediate prospects for the global oil market development.

According to Alexey Gromov, the events in the eastern Mediterranean objectively influenced oil pricing, albeit not to the extent expected in mid-autumn.

"Until recently, this problem did not concern Russia and its exports of oil and petroleum products. But this may change, since suppliers from Russia use the "shadow fleet", and its ships have different flags. In the coming months, selective rocket attacks by the Houthis will create a nervous situation around the price of oil, which will be slightly higher than the levels that should be formed from the analysis of fundamental indicators," the expert noted.

According to Alexey Gromov, sanctions against the Russian oil industry have also been greatly overestimated this year. Although it must be admitted that since the autumn of 2023, the EU, the USA and the UK have begun to use new tools, which to a certain extent have had a negative effect on the work of the "shadow fleet". The "test shot" of restrictions was in September, when the United States imposed sanctions against two companies and two tankers. Then in November, 6 more companies were added to the list, and in December there were even more of them. However, such restrictions should not be overestimated.

"However, all this increases the cost of freight. If in September its price was at a minimum for the whole of 2023, today freight costs 40-60% more than in September. The highest prices are in the case of oil shipments from the Baltic ports of the Russian Federation. The Russian oil industry is helped by the current oil price, which (taking into account discounts) does not significantly exceed the price ceiling, which does not scare off European carriers," the analyst explained.

If the cost increases in 2024, then it will be somewhat more difficult for Russia.

"But I repeat, there are not so many fundamental factors for a strong increase in the cost of oil in the world in the first quarter of 2024," Gromov added.

Among the main factors that influenced the price of oil in 2023, Alexey Gromov highlighted the successful overcoming of restrictions by Russia, as well as the retention of Moscow's production level in accordance with OPEC+ agreements.