Page 106 - RusRPTOct23

Diesel shortage threatens the world. At any other time in history, the current state of the global diesel market would have sent some countries into a state of panic. Globally, the price of the fuel is exorbitantly high relative to the price of the oil it is produced from, signaling a shortage that should alarm inflation-obsessed governments everywhere. And in just a few months, winter will arrive in the Northern Hemisphere, driving up demand for heating. Today's dwindling stocks mean that the world can't afford any sudden surprises: a supply constraint could occur at any time.
● Prices
According to the results of the third quarter, world oil prices increased by almost 30%, and in the near future the price of a barrel of Brent may exceed $100 - this proves that the risky plan of Saudi Arabia and Russia, which reduced oil production, worked. Next year, Russia will need higher oil prices even more, otherwise the government will not meet the budget with record military spending.
The risky bet of Russia and Saudi Arabia on reducing oil production in order to maintain prices paid off, The Wall Street Journal wrote in today's oil review. The rise in prices compensated for the physical decline, a calculation by the consulting agency Energy Aspects showed: in the third quarter, Saudi Arabia’s oil revenues increased by $2.6bn compared to the second quarter, and Russia’s by $2.8bn. It is possible that success will push OPEC+ to introduce further restrictions.
OPEC+ announced the first reduction of 2mn barrels per day back in October 2022. In April 2023, some cartel members agreed on a new voluntary production reduction by 1.66mn bpd. And on September 5, Russia and Saudi Arabia announced an extension of the reduction until the end of the year. All of this was extremely risky: a major oil producer was losing market share by cutting production, and if the shortage had not raised prices, both countries would have had a big hole in their export earnings. But the risk did not materialize.
Russia's income from oil sales has increased to its highest point since October 2022. According to the International Energy Agency (IEA), in August 2023 Russia's revenues from oil exports increased by $1.8B to $17.1B due to an increase in oil prices, which more than compensated for the decrease in export volume. Fuel exports in August decreased by 150,000 barrels per day to 7.2 million barrels, which is 570,000 below last August's level. Exports to China and India fell to 3.9 million bpd from 4.7 million bpd in April and May but still accounted for more than half of the total. In August, Russian Urals oil traded at an average level of about $70 per barrel, $10 higher than the price ceiling set by the G7 countries. In the first week of September, the average price for Urals was already $75 per barrel.
The average price of Urals oil in January-August 2023 was $56.58 per barrel, in January-August 2022 - $82.13 per barrel. The average price of Urals oil in August 2023 was $74.0 per barrel, which is 1,001 times lower than in
106 RUSSIA Country Report October 2023 www.intellinews.com