Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Forbes on the current situation with the supply of Russian oil and the expectations of an embargo on its supplies by the EU.
The decision of the US and the IEA to start selling off the strategic oil reserve will not allow prices on world markets to skyrocket, Aleksey Gromov says.
Such a decision is intended to serve as a kind of damper in anticipation of an embargo on Russian oil supplies, because when an embargo is announced in one form or another, oil prices begin to fly into space, he believes. “It is clear that the United States is working ahead of the curve, hoping that the European Union will impose an embargo on Russian oil in one form or another,” the expert believes. “And then the damping mechanism in the form of releasing oil from the strategic oil reserve will make it possible to smooth out the negative effect on prices.”
Gromov believes that the risk of a partial embargo exists, in particular, on offshore supplies of Russian oil. However, in his opinion, this will not mean an immediate cessation of sea supplies, but rather the American scenario will be implemented with the entry into force of the ban 45 days from the date of adoption, so that buyers can receive already paid shipments of Russian oil.
According to him, in terms of its physical and chemical properties, Russian oil is well suited for many refineries, not only in Europe. In the event of an EU embargo, it will be possible to find buyers in Asia, for example in China, especially since Middle Eastern oil is sold today at a premium to Brent, and Russian Urals at a discount.
“Given that the world oil market is in short supply, and Russian oil is a sought-after commodity, in the event of the embargo, there will be a redistribution of supplies: Russian oil will flow to the east, and Middle Eastern oil to the west,” Gromov says. “As supply chains are reconfigured and the market stabilizes, discounts on Russian oil, which have already fallen from $30 per barrel in late March to $18 in early April, will continue to decline.”
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