HomeMediaLatest NewsRussian oil prices are falling: have US sanctions worked

Russian oil prices are falling: have US sanctions worked

30 January 2024

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy studies of the Institute for Energy and Finance, commented to Forbes on the current situation with price discounts on Russian oil.

"Indeed, from the second half of November to the current moment, there has been a tendency to increase the discount on Russian oil," Alexey Gromov says. — According to the data we received for the previous week, the discount on Urals in the port of Primorsk was $17.5. These are figures close to what Americans write. And this is clearly more than a reduction in the price of Brent."

On the one hand, Gromov argues, since October, the Americans have been imposing sanctions on shipping companies from the UAE, Hong Kong, Turkey and their tankers with enviable regularity, accusing them of supplying Russian oil at a price above the price cap. However, in fact, the Forbes interlocutor adds, today only 13 shipping companies and 25-26 tankers that belong to them are under OFAC blocking sanctions. In particular, the expert recalls that in December a large-scale sanctions package was adopted, which included a whole group of shipping companies, in particular SUN Ship Management from the UAE, which managed 92 tankers carrying Russian oil. But as soon as information appeared that this company could fall under blocking US sanctions, it transferred almost the entire fleet of tankers it operated under the jurisdiction of other shipping companies, and they continue to function, he points out.

"Currently, only 25-26 tankers are not working, they are now off the world market, and we do not yet see any signs that they are returning to service and transporting oil," Gromov notes. "But given that Russian oil is transported by various estimates from 400 to 600 vessels of the shadow fleet, we must understand that a small number of vessels have been sanctioned."

However, according to the expert, the sanctions still had an impact on price reduction and discount growth, although not directly, but indirectly. "One of the main buyers of Russian oil now is India, which uses the tightening of secondary US sanctions as an excuse to knock out additional discounts," the expert says. According to him, there has been no shortage of oil on the market recently, and this gave India an additional opportunity to refer to the fact that if its conditions are not met, it will be able to receive additional volumes of oil from Iran, Venezuela and some other countries.

According to Alexey Gromov, the market has begun to react to the situation in the Red Sea region. If earlier the Houthis attacked mainly container ships, then on Friday the trader Trafigura tanker carrying Russian naphtha was attacked.

"And it can be assumed that if the situation worsens and pushes prices up, then the position of Russian oil carriers who do not want to lower prices and keep pausing looks justified: they simply expect an improvement in the price situation on the world oil market due to geopolitical problems unrelated to Russia," Gromov sums up.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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