Russian attack on price ceiling

In many European media, we hear that sanctions on Russian natural materials are not working and the price ceiling is being circumvented. In today's article, we will look at what it is present and see if Russia has a chance to get out of the grip of sanctions. At first, we'll look at what the June data looked like. Here we will usage information from the reports of CREA, MAE (EAI), Argus, Kpler. Currently, Russian companies' revenues from fossil fuel exports have reached the lowest monthly value since the start of the CREA invasion.

ede export of almost all natural materials falls from the peaks, and the most spectacular drops are seen on gas and oil supplied by pipelines.

The price drops for the first half of the year are 47% year-on-year, which is besides confirmed by Russian budget revenues. In short, Russia has little money to wage war and must look for savings by besides introducing fresh taxes, which is widely described on the portal economicosj.pl.

Worth noting is that it is simply a permanent trend, The decline in fossil fuel exports for the 3rd period peaks from up to EUR 591 million a day (663 million USD). In June 2023, it was 8% little than in May and 18% below the levels of April.

All indicates that this will aggravate the decline in all Russian exports for June, in which the balance of payments was negative. We wrote about it a fewer days ago. A dramatic decline in Russia's balance of payments (economicarosji.pl).

Russia's largest decrease in exports of fossil fuels afraid offshore oil, which in June fell by EUR 24 million per day (-12%) compared to May 2023.

Oil exports to India decreased by 29% in June compared to May 2023 and oil exports to China were at the same level in terms of value. Oil exports to China fell by 63% in June compared to May 2023. The renovation of the port in Primorsk, which was held last month, surely played a large function here. However, we besides see volume declines in the first half of July, about 1 million barrels little in the Asian direction.

All Russian oil exports fell in June by 600 kb/d to 7.3 mb/d, the lowest level since March 2021. Estimated export revenues fell by US$1.5 billion to US$11.8 billion – almost half as much as a year ago.

And here we get to the issue of the price for Russian oil, which in the case of a mix of URALS in fresh days, exceeded US$60 on the Russian stock exchange. In place deliveries from Black Sea ports, it approached the price cap strongly. While the price in long-term contracts should stay below the ceiling, on fresh contracts Russian companies are proposing prices already exceeding the ceiling for Asian customers. In favour of the Russians as far as price is concerned, 2 factors are the announcement of Saudi Arabia's simplification in production (1 million bd since July) and Russia (500 000 since August) and the launch of increased refining capacity in China. The riots in Libya and the leakage from the Nigerian terminal (600 000 bd) should besides be mentioned in the short term.

The Russians are opposed to the following facts:

• Global production changes from November to June have not occurred. There's no real drop in supply. The lower production from Saudi Arabia and the main members of OPEC+ has so far been compensated for the higher production of another producers since the introduction of production cuts last November.
• Iran, exempt from cuts due to sanctions, increased production by 530 kb/d over the same period, reaching its highest level in 5 years. Growth dynamics is maintained in July. What is worth noting, it is now Iranian oil that displaces Russian from Chinese and Indian refineries. And the shadow fleet, which was carrying Russian natural material a fewer weeks ago, changed colors.
• Deliveries from the United States have increased by 610 kb/d since last year.
• According to many analysts, the increase in 2023 for oil by 2.2 million b/d was based on the presumption that China would be liable for 70% of this value. And here we should mention the drop in Chinese exports, which shrank by 12.4% y/y to US$285.32 billion in June 2023, which is the largest decrease since February 2020, after a drop by 7.5% in May.
• I guess any of the agency's already done a fix on the residence side. The MAE reduced the projections for 2023 by 220 kb/d. It is inactive 102.1 million bd, but the situation is dynamic and another correction possible.
• And last thing in June, Chinese oil stocks increased again, reaching evidence values.

Is Russia stuck in the price cap by the end of the year?

Not necessarily, global oil prices can emergence and stabilise at a higher level under appropriate circumstances. In this case, Russia may at the expense of a smaller volume of sales effort to adjust the marketplace to prices above the price ceiling. However, it must face competitive Iranian oil especially in the most crucial Asian markets. It will besides gotta engage all its possible to circumvent the sanctions imposed. Tankers, insurance, clearing currencies, bank accounts, etc.

It will be a hard game, full of traps, threats, unfair intermediaries, late payment with the hazard of ship confiscation and transport. Time will tell if it will. In my opinion, yes. And 1 more thing, so far Russia has been able to number on India and China as trading partners. Will this be the case if we offer more costly Russian oil, without immense discounts?

However, in Russian activities, we can yet see a different strategy from the erstwhile one, namely the deficiency of strategy. The Russian authorities instructed oil companies to limit oil exports. This week there was a gathering with top-level managers of oil companies who were asked to "take greater efforts to warrant a drop in exports" next month.
The day before, Deputy Prime Minister Aleksander Nowak said that companies would decide either to reduce exports or to produce. But in general, our occupation is to reduce supply to global markets, Novak said.

In conclusion, Russia is able to break the price ceiling imposed by democratic countries, but will pay the price in the form of a drop in volume in 2023..

You'll ask if the higher prices of Russian oil will translate into an improvement in Russian budget revenue? That's what I'm going to learn from yesterday's Live, which 1 I would like to encourage.