The war in Ukraine and the loss of Russia on the oil front
Urals oil in December, after the Union set low prices for an embargo on imports of Russian oil and a price ceiling, was sold at big discounts. This was reported by Reuters, citing its own sources. Thus, Moscow’s main buyer, India, purchased a barrel of Urals at a price below the significant artificial cap of $60.
According to Reuters, the application of the action will launch Russia in search of alternative ways to sell an estimated million barrels a day and compete with suppliers from Asia and the Middle East.
At the same time, freight rates also increased (up to 11-19 dollars). As a result, Russian oil in the cluster is being sold below cost.
“People will pay for the war”
The situation that has developed in the oil market today should not be completely attributed to Western demands, just as it should not be argued that they had acted before, an economic observer and publicist noted in an interview with the Voice of America Russian service. Maxim Blunt. He recalled that since March, Russian oil has been trading at an unprecedented discount to Brent – up to $30-35 per barrel.
“What happened now was predictable, since a price ceiling was set, for which everyone began to prepare since August, when the decision to introduce it was made,” he added. – This had an impact on prices for all the remaining (other than transported by sea) oil. And here everything is logical. If you can buy it cheap in Russia, why buy expensive? Exactly this success captured China and India.
But the general development of the dynamics of oil prices, which emerged in the summer, happened not only with sanctions, Maxim Blunt specified.
“When the economy slows down, there is also a need for energy resources. It has always been like this, – the expert says, – And this was especially true for the Chinese economy, and China still remains the main driver of the oil market. Therefore, a complex of problems worked here. ”
Maxim Blunt: “The Russian economy is gradually but relentlessly sliding into a “swamp”, but until fewer catastrophic numbers disappear than expected. The country has lost a large part of its financial capabilities, but, unfortunately, this was not reflected enough in the ability to save. In a word, if someone asks, it is rather the consumer sector.”
The population pays for the war – first of all, noticeable in the discovery of high inflation with all its “charms”, the analyst stated.
“Well, and Putin is in an absolutely surreal space, where he reaches for himself and everyone else. If you listen to one of his recent speeches, then there was and is no war with Ukraine, there was unprovoked perfidious aggression on the part of the collective West, which wanted to destroy the Russian environment. Moreover, it turns out that he is most concerned about the situation with construction in the occupied territories…,” Maksim Blunt summed up.
“All the money is thrown into the military furnace”
Sanctions and western oil embargo certainly apply, says oil and gas analyst Mikhail Krutikhin. According to him, Russian oil is already going to other consumers at a price lower than that introduced by the EU, the G7 countries and Australia at $60 per barrel.
“Yes, nothing is said about the ceiling in the contracts, it’s just that the price formula is given in the description, that’s all, but the main things don’t change,” says the Voice of America interlocutor. “Moreover, the price index also rolled down for other parameters of taste, without falling under the action of the limiter. Now some part of Russian oil goes to other directions, mainly, by the way, this is India. The supply to Turkey has been slightly increased, but not to China. Because it is commercially unprofitable to drive oil to China from the Baltic and the Black Sea: a very long route plus high freight rates. Oil from consumption at a very low price, almost a loss. In a word, the sale of the market for a part of the oil that fell under the embargo has been found in Russia, but this is an inadequate replacement. It does not compensate for the losses suffered by Moscow.”
Of course, selling oil below cost is nonsense, Mikhail Krutikhin agrees: “This may continue for some time. But the oil companies, I think, will very soon demand assistance for the losses they have suffered. And sideways such an economic policy, if you please, will spill over to ordinary citizens. The Ministry of Economic Development already predicts that Russia’s federal budget revenues will lose about 23% next year. According to available estimates, even more – about 30%. And if budget expenditures are so sharply reduced, then, of course, there are fewer funds left for the needs of the population: health care, education, pensions, and so on.”
Whoever has nothing to lose here are “punishers protecting the regime from the population,” the analyst claims.
“They will continue to be heavily funded, and the army will not suffer, because Moscow is waging war, everyone is throwing money into the military furnace. But from December 1, tariffs for gas and housing and communal services have been increased. Most likely, fuel prices will increase. So the entire burden of losses will fall on the shoulders of highly paid taxpayers – both corporate and citizens, ”resonance Mikhail Krutikhin.