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Oil is not afraid of sanctions

09 December 2022

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented live on the Kommersant FM radio station about the reasons for the current decline and prospective price dynamics for marker and Russian grades of oil.

Most likely, there will not be a strong collapse in prices in the near future, Alexey Belogoryev says:

“In this case, it has nothing to do with Russia. All market participants calmed down after the panic attack that took place in the summer and in September. Since October, they have been convinced that there will be no serious reduction in supplies from Russia, and this has been confirmed in recent days. The main factor now is the recession of the largest importers and consumers.

Even the easing of epidemiological restrictions in China does not help much in this case. Everyone is mainly focused on economic performance, including in the euro area, as well as in Northeast Asia. Prices for Urals and ESPO will be in the same trajectory with Brent.

As for discounts on Russian oil for Asian countries, they will decrease in absolute terms, while in percentage terms they will remain approximately the same. Much depends on how much the freight will cost. Domestic companies continue to massively use European freight, and as long as the average market price of Urals is below the marginal cost, this will continue. But the fleet for the transportation of Russian raw materials is growing, it is controlled by our oil companies, since everyone is preparing for the fact that the situation will be worse - the ceiling will start to decrease.”

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