The embargo and the price ceiling for Russian oil has come into force: what consequences to expect

Tinkoff-Journal published an article by Marcel Salikhov, president of the Institute for Energy and Finance "The embargo and the price ceiling for Russian oil came into force: what consequences to expect".

What had happened to Russian exports before the embargo was introduced

Until February 2022, Russia exported about 5 million barrels of crude oil per day. Half of them went to the EU countries, the rest mainly to Asia. Of these, 3.5 million barrels are tanker deliveries. In recent months, according to tanker tracking data, Russia has been exporting about 3 million barrels per day.

The reduction occurred at the expense of Europe. Previously, 1.8 million barrels were sent there. As of November 18, deliveries to Europe were at the level of 0.88 million barrels per day. That is, supplies have decreased by a million barrels.

Russia sent this million barrels to Asia. In Europe, this oil was replaced by supplies from Saudi Arabia and North Africa, which, in turn, removed these volumes from Asia.

Until February 2022, the discount for Russian Urals oil - that is, the difference between the price of Urals and Brent - was within $ 2. After February, it rose to $30-35, and then began to decline again as logistics improved. Since the end of August, the discount has been around $25 per barrel.

What will be the consequences of the embargo for Europe

Most Western consultants have come to a consensus in their forecasts. According to them, Russian exports will lose a million barrels per day next year. Russian exports, including oil products, are 7.5 million barrels per day. That is, the reduction will be 13%.

The forecast of analysts of the Institute for Energy and Finance is more moderate - minus 7%. That is, a reduction of about 500,000 barrels per day.

What will be the consequences for Russia

Probably the point of the ceiling is to play for time and see how it will work. The control mechanism is not fully understood. The European Union will collect documentation, look at it, analyze it and, perhaps, in a year will make the ceiling different. But the embargo is likely to lead to a drawdown in exports.