Page 86 - Russia OUTLOOK 2023

European embargo and the price ceiling, industry experts predict a decline in
production in January-February 2023, which will be exacerbated by a drop in
demand from Russian refineries.

The fact is that reorienting the sale of petroleum products (the EU embargo on
them comes into effect on February 5) is much more difficult than oil. Therefore
in February, the demand for oil from Russian refineries may decrease by
2.8–3.2mn tonnes compared to January, and production by 2.5–3mn tonnes. In
December, oil exports from Russia by sea decreased in any case by about
20%.

Meanwhile, Russian oil delivered from the Baltic ports is sold at a discount of
50% to Brent in January. Urals in Primorsk cost $37.80 per barrel in the first
week of January, with Brent at $78.57.

Russia has become dependent on a tiny pool of buyers, mainly China and
India, the agency explains. But even in these areas, Baltic oil is forced to
compete with the Middle East, and the shortage of tankers and long delivery
routes, which have lengthened from days to weeks or even months, can only
be compensated for by a discount.

Domestic experts consider $40 per barrel as the level of budget catastrophe.
Bloomberg does not exclude that Russia will soon go for a direct reduction in
production.

Russia increased oil exports in November to a maximum volume since
April – by 270,000 bpd to 8.1mn bpd, according to the report of the IEA.

At the same time, according to IEA estimates, Russia's export revenues
decreased by $0.7bn and amounted to $15.8bn in November.

Oil exports remained virtually unchanged in the last months of 2022 and
amounted to around 5mn bpd, despite a decline in oil supplies to the EU by
430,000 bpd to 1.1mn bpd. Deliveries to India reached a new high of 1.3mn
bpd. Meanwhile, Russia increased exports of petroleum products, mainly
diesel fuel, by 300,000 bpd to 1.1mn bpd.

The IEA also stated that in November 2022 Russia had increased oil output by
90,000 bpd, to 9.81mn bpd. In December, production may decrease by
400,000 bpd against the background of the entry into force of the EU embargo,
and by April next year, by 1.8mn bpd from pre-February levels, the IEA
believes.

At the same time, the total volume of production of liquid hydrocarbons in
Russia reached 11.2mn bpd, which is only 200,000 bpd below the levels
before February 2022, the report said.

86 Russia OUTLOOK 2022 www.intellinews.com