Page 123 - RusRPTOct22

· Second, as we examined in our June note, Russian oil company EBITDA will likely only be modestly affected by a 1-2mmbpd reduction in exports from any embargo, with lower volumes and a widening Urals-Brent discount largely offset, mostly likely, by higher global prices and a weaker ruble. Likewise, we think Russian budgetary receipts would also prove to be relatively resistant in ruble terms in such an event.
OPEC+ members surprised the market on September 7 by agreeing to cut their output target by 100Mbbls/d for October. However, given that OPEC+ has been producing well below production targets for some time now, the impact of this cut on actual supply is limited.
OPEC+ agreed to cut production in October by 100Mbbls/d, which would take production targets back to the same levels as in August. The group highlighted volatility and reduced liquidity in the market as justifications for the move by helping improve stability and ensuring that the market functions in an efficient manner. Given the volatility in the market coupled with plenty of uncertainty, OPEC+ has not ruled out further action if and when it is needed.
While the headline number is for a 100Mbbls/d cut, in reality, the actual cut will be much smaller. It is important to remember that OPEC+ have failed to hit their production targets all year. In July, OPEC+ output was actually more than 2.7MMbbls/d below the target production. Most producers have not been able to hit their targets and are producing quite some distance below where they should be. It is only Saudi Arabia, the UAE and Kuwait that have been producing at or near their agreed output levels. Therefore, it will likely be only these producers that will need to reduce output by their share of the 100Mbbls/d. Combined, these three producers would need to reduce output by around 40Mbbls/d from September levels.
Russian gas giant Gazprom said on September 6 that China will start paying for Russian gas in rubles and yuan instead of Western currency, as Moscow seeks closer ties with Beijing in the wake of economic sanctions over the Kremlin’s war in Ukraine. "A transition was made to making payments for Russian gas supplies to China in the national currencies of the countries — the ruble and yuan," Gazprom said in a statement following a video conference meeting with Chinese oil group CNPC. “The new payment mechanism is a mutually beneficial, timely, reliable and practical solution,” Gazprom head Alexei Miller said.
Russia and China have agreed the main parametres of gas supplies to China via the new pipeline that may run through Mongolia, including the price of gas, President Vladimir Putin said at the Eastern Economic Forum (EEF) on Wednesday. It was reported earlier that the construction of the Soyuz Vostok gas pipeline might kick off in 2024, while the gas pipeline might become
123 RUSSIA Country Report October 2022 www.intellinews.com