Page 4 - AsianOil Week 09 2023

AsianOil COMMENTARY AsianOil

Russia abandons deceptively

deep Baltic discounted prices

for market prices in Asia

Urals price assessments no longer show how much Russia is actually getting for its crude.

RUSSIA THE discounts Russia is being forced to offer on Economists have been looking for evidence of
its oil exports after a comprehensive embargo these whopping discounts in national accounts,
WHAT: and oil price cap scheme was imposed on crude companies’ profit reporting and customs date –
Asian customers may on December 5, and oil products on February but they can’t find them.
be paying much smaller 5, are deceptively big. Nearly half of Russia’s oil “We do not find crude oil discounts as large
discounts for Urals exports used to go to Europe, shipped through as those reflected in Urals prices towards the
oil than the FOB price the Baltic Sea. That trade has almost stopped end of 2022. In particular, prices in market
assessments suggest, or now. But Russia is still exporting as much oil segments that are unaffected by lower Europe
none at all. as it used to but sending it half way around the and demand, e.g., exports from Russia’s Pacific
planet to new customers in Asia. The problem Ocean ports, have not dropped in a meaning-
WHY: is the deep headline discounts of up to 50% or ful way and shipments do not appear to com-
Russia may be adding more are based on Baltic prices, whereas econ- ply with the price cap. What the EU embargo
surcharges that drive omists say Asian customers pay much smaller and G7 price cap have, thus, triggered is a
the price up higher, and discounts, or none at all. fundamental fragmentation of the market for
exports from Baltic ports The EU embargo is enforced by sanction- Russian crude oil,” a paper from a team of top
have dried up. ing EU shipping companies that accept cargoes economists from the Social Sciences Research
of oil priced at $60 per barrel or more. As bne Network (SSRN) – Tania Babina, Benjamin
WHAT NEXT: IntelliNews reported, there are three markets in Hilgenstock, Oleg Itskhoki, Maxim Mironov
Evidence could emerge Europe: piped deliveries via the Soviet-era Dru- and Elina Ribakova – assessing the impact of
that the Western price zhba pipeline where prices are set by long-term the oil sanctions found.
cap on Russian oil is contract; Russian oil companies delivering their The SSRN paper is based on its calculations
proving ineffectual. own oil to their own refineries in Europe; and using high frequency and customs data, and
European customers still willing to buy Rus- they discovered there is a gap between the price
sian crude on the open market. It is only the last inferred from customs data and the reported
group that is receiving the deep discounts and “discounted” price. SSRN the found actual aver-
the volume of these sales is dwindling fast. age price of Urals since December oil was not
The headline price for Russia’s Urals blend in the reported $52 but $74 per barrel. Brent was
January was $46 a barrel against the $75 Brent trading between a high of $81 and a low of $71 in
was trading at on February 27, and well below December, suggesting that for most of the month
the maximum allowed $60 threshold set by the there was no discount on Russian oil exports at
oil price cap scheme. all, or at least only a few dollar’s worth.

P4 www. NEWSBASE .com Week 09 03•March•2023