Page 109 - RusRPTFeb23

9.1.1b Oil sector news
In 2022, Russia increased oil production by 2%, to 535mn tonnes, and in the top four producers, only the sanctioned Rosneft reduced production, writes Kommersant. Exports to non-CIS countries via pipelines and the sea as a whole increased by almost 19% over the year, to 207mn tonnes.
But it seems that this is the last year of growth. Under the conditions of the 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 anyway 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, that have gone from days to weeks or even months, can only be compensated for with a discount.
Domestic experts consider $40 per barrel as the level of the budget catastrophe. Bloomberg does not exclude that Russia will soon go for a direct reduction in production.
US officials and allies agreed to move toward price caps on Russian refined fuel products, agreeing to review the level of the Russian crude oil price cap in March, the US Treasury said in a statement. Deputy Secretary of the Treasury Wally Adeyemo on January 20 met with deputy ministers representing the global coalition of countries imposing the price cap on seaborne Russian crude oil, known as the Price Cap Coalition. The EU will implement an embargo on Russian oil products starting from February 5. The EU imported around 220mn barrels of diesel-type products from Russia in 2022, according to Vortexa Ltd. data compiled by Bloomberg.
The discount on Russian oil rose in January mainly due to a hike in the
109 RUSSIA Country Report February 2023 www.intellinews.com