Page 7 - FSUOGM Week 01 2023

FSUOGM COMMENTARY FSUOGM

budget, but with the cap at $60 per barrel it is per day (bpd), or 54% week on week, to just
not expected to have much of an impact next 1.6mn bpd in the week to December 16, using
year. Some countries led by Poland and the Bal- weekly flow reports from Russian ports using
tic states were pushing for a much lower cap of vessel-tracking data.
$30 per barrel that would have had severe conse- Seaborne flows of Russian oil to Europe
quences for the Russian budget. dropped to only 146,000 bpd on average in
Russian Finance Minister Anton Siluanov the four weeks to December 16, with Bulgaria
said on the same day that Russia's budget defi- remaining the only EU destination. Urals oil
cit could widen in 2023 from the forecast 2% of brand has recently been trading at $51-54 per
GDP to 3%. barrel in Europe, compared with $61-65 per bar-
Preliminary data point to a collapse in the vol- rel in early December, before the above measures
ume of Russian seaborne oil exports in mid-De- came into force.
cember, which suggest some success in meeting “The November IEA data show that the EU
the price cap objective of curtailing Russia's rev- still accounted for nearly 30% of Russia's total
enues, but less in terms of keeping Russian crude oil exports (including both crude and petro-
on the market, Oxford Economics said in a note leum products) in November, the month before
on December 22. the embargo kicked in, with other/unspecified
“The collapse in volumes appears related to destinations indicated for 23% of all cargoes,”
logistics including shipping shortages; we see no Oxford Economics reports. “But out of 1.1mn
evidence that Russia is deliberately cutting its oil bpd of crude exports to Europe, only 330,000
exports. Russia is still mulling its response to the bpd were seaborne volumes, with deliveries via
EU embargo and the EU-G7 oil price cap, which Druzhba pipeline (590,000 bpd) exceeding the
came into force on 5 December, but we think former. After 5 December, under the terms of
Russia will seek to avoid further damage to its the EU oil embargo, only around 350,000 bpd of
oil output and exports in current circumstances,” Druzhba deliveries (to Hungary, Czech Republic
Oxford Economics said. and Slovakia) and seaborne exports to Bulgaria
Although India has not joined the oil price are allowed. Germany and Poland also used to
cap, its companies are complying with it in import Russian oil via Druzhba but have volun-
practice because they are buying at prices tarily chosen to halt their purchases at the end
below the cap. Volumes of Russian crude of this year.”
exports may recover somewhat in the coming Russian oil is still trading above the price cap
weeks as more buyers from the countries that of $60 per barrel in Asia, which may explain
have not officially joined the cap utilise the why some of the shipping companies operating
opportunity to use EU services, Oxford Eco- there have withdrawn their services. They may
nomics added. become more willing to ship Russian oil if and
According to Bloomberg, Russia's total sea- when its price falls below $60, Oxford economics
borne crude exports plunged by 1.86mn barrels says ™

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