Oil from Russia will continue to be in high demand in the world even against the backdrop of new Western restrictions.
This was announced on Tuesday, December 6, by Deputy Prime Minister Alexander Novak.
“Interference (of the West. -
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) in market instruments, of course, affects the work of our companies, the sale of products in export markets.
Nevertheless, I want to emphasize once again that Russian oil ... will find its buyers, ”Novak said.
According to him, today Moscow remains one of the key suppliers of raw materials to the world energy markets.
At the same time, global consumption of hydrocarbons continues to grow, the deputy chairman of the Cabinet noted.
“The growth of the world's economies must be provided with energy resources.
There is not much oil in the world, and Russian oil has always been and will be in demand,” the Deputy Prime Minister added.
Recall that on December 5, the European Union imposed an embargo on the import of tanker oil from the Russian Federation and banned its companies from insuring and transporting Russian raw materials by sea to third countries at a price above $60 per barrel.
From February 5, 2023, the relevant restrictions should also apply to petroleum products.
The idea of the marginal cost of Russian oil was also supported by the G7 states (USA, Canada, France, Germany, Italy, Japan, Great Britain) and Australia.
As US Treasury Secretary Janet Yellen previously explained, the price ceiling should limit Moscow's excess profits from the sale of hydrocarbons and have a positive effect on the entire global energy industry.
The Russian authorities have repeatedly warned that they will cut off oil supplies to those countries that support the price ceiling.
According to Alexander Novak, the government is now discussing with business such a mechanism to stop sales and may launch it by the end of 2022, TASS writes.
In turn, attempts to limit the cost of raw materials risk hitting the very authors of this initiative, the Deputy Prime Minister believes.
“We do not accept those mechanisms that are adopted artificially as price limits by ... consumer countries.
They step, in fact, on the same rake.
If you set ceilings in non-market ways, this can only lead to a global decrease in investment (in oil production. -
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), to a shortage in the future of the corresponding energy resources.
And this, in turn, will lead to an even greater increase in prices,” Novak explained.
Moscow, meanwhile, is changing the supply chains of its oil, but does not see this as a tragedy, the Deputy Prime Minister added.
Thus, Russian companies use the services of smaller traders and use new transportation insurance mechanisms.
“Yes, we are being put in more difficult conditions, but nevertheless we continue and will continue to sell oil.
Of course, new tools, new insurance mechanisms, interactions between companies, transportation will be used.
Major players in the market, such as traders, are also changing,” said Alexander Novak.
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© Grigory Sysoev
It is curious that even in the face of external restrictions, Russia has managed to increase the volume of oil production.
As Novak noted, over the 11 months of 2022, the production of energy raw materials in the country increased by 2.2%, to 488 million tons.
According to the Cabinet of Ministers, in December, the corresponding figures will remain at the level of November, and in the future, production may decrease, but only slightly.
“We do not exclude that, if necessary, we may have situations associated with periods of decline (production. -
RT
) of oil, since the situation is uncertain: there is a lot of volatility today.
I don't think it will be big.
Nevertheless, we do not exclude this, although we are doing everything to ensure that the situation is stable and the sale of oil is at the levels that we reached in 2022,” the Deputy Prime Minister emphasized.
Experts interviewed by RT also do not expect a serious drop in Russian oil production as a result of Western restrictions and Moscow's response.
As long as the country continues to reorient the supply of raw materials to the East, hydrocarbon production may temporarily decrease, but will be restored later, Ronald Smith, senior analyst at BCS World of Investments, is sure.
“The combination of the price ceiling and the oil embargo will temporarily reduce Russian oil production and exports by 500,000 bpd, while the February embargo on petroleum products will reduce the figures by another 500,000 bpd.
However, a significant part or all of the falling volume will be restored by the end of 2023, since the new export logistics will be set up and will enter into regular use, ”RT said.
A similar point of view is shared by Natalia Milchakova, a leading analyst at Freedom Finance Global.
In her opinion, Russia will be able to fully compensate for the loss of Western markets in a relatively short time, but this requires the development of an appropriate infrastructure.
“It is necessary to increase the tanker fleet, conclude contracts with new insurers (mainly Chinese, but our state structures can also insure cargo) and increase oil loading capacity in the ports of southern Russia.
Until now, our largest oil terminals were located only in the Baltic Sea, since the bulk of the export of raw materials went to the West,” Milchakova noted.
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© Vitaliy Timkiv
It is noteworthy that even in the run-up to the European embargo and price ceiling, Russia could buy more than 100 tankers to ship raw materials to China, India and Turkey, the Financial Times reported.
“The unimaginable will happen to prices”
According to Natalia Milchakova, in the near future the cost of oil on the world market will continue to fluctuate in the range of $80-100 per barrel.
However, if Russia launches a mechanism to ban the supply of raw materials to countries that have supported the price ceiling, quotes may again exceed $100.
“This will be a clear signal to the market about the reduction in oil supply.
Moreover, the Russian Urals in the EU, which now costs $55-59 per barrel, may subsequently become more expensive than the reference Brent.
Let me remind you that many oil refineries in Eastern Europe are historically geared towards processing Urals.
And we are talking not only about refineries in Hungary and the Czech Republic, where Russian oil will continue to flow through the pipeline.
This means that the demand for Urals in Europe will remain high, and it will be very difficult to find analogues for it, ”Milchakova said.
According to Igor Yushkov, a leading analyst at the National Energy Security Fund, Europe will eventually be able to replace Russian oil, but the costs of changes in logistics could be high.
As the specialist recalled, earlier the cost of raw materials in the EU was formed on the basis of economic realities: territorial proximity provided Europe with more favorable terms and cost of oil supplies from Russia.
Now the restrictions imposed by Brussels deprive the European Union of this advantage.
“Now our oil goes to Asia, and raw materials come to Europe from the USA, Africa and the Middle East.
Delivery from these regions is more expensive.
Plus (since some European refineries can only work with Urals), the EU will have to mix oil, and this is also additional spending.
As a result, expensive fuel is included in the cost of all goods, and inflation is growing in the EU,” Yushkov explained.
Earlier, Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev warned about the consequences for Europe itself of introducing a ceiling on oil prices.
According to him, the actions of Western countries are reminiscent of “a crowd of burghers who have been on a spree, who, after overeating schnapps with sausages and beer, climb into ice water for the first time.”
“Some of them will quickly sober up and jump out.
Some will learn to swim in cold water, but very poorly (it is difficult to learn in an ice-hole).
And some will sink.
And they will be buried, raising dreary toasts that they fell in an unequal battle with the Russian bear and General Moroz.
Well, there they go!
What is good for a Russian is death for a German,” Medvedev wrote in his Telegram channel.
He also added that attempts at price restrictions will only lead to the “disappearance of the product or an increase in prices for it”: “After all, no one has repealed the law of value.
So it will be with oil.
Of course, it will not disappear, but the unimaginable will happen to prices.”