Russia may take steps to limit discounts on its oil.

This was announced on Tuesday, January 10, in the press service of the Ministry of Energy of the country.

The agency intends to monitor the dynamics of commodity prices and, if necessary, set a limit on the size of the discount based on market quotations.

The authorities are going to present details about the work of such a mechanism in the near future.

The Ministry of Energy also plans to soon publish the procedure for applying retaliatory measures to the oil price ceiling introduced by the West.

In accordance with the presidential decree, Russian companies will be prohibited from selling raw materials if the contracts directly or indirectly imply limiting the cost of the energy resource.

“This ban applies to any transactions with Russian oil up to the end consumer, which implies, among other things, the refusal to work with traders who do not comply with this provision of the decree ... Illegal interference by Western countries in market mechanisms affects the safe and stable energy supply of the world and will require significant joint efforts on the part of responsible countries to rectify the situation, ”the message says.

Recall that in 2022 the European Union, the G7 states and Australia gradually refused to supply Russian oil, and from December 5 they banned their companies from insuring and transporting raw materials from Russia to third countries at a price above $60 per barrel.

From February 5, 2023, the relevant restrictions should also apply to petroleum products.

In response to this decision, Russian President Vladimir Putin on December 27 signed a decree on countermeasures.

According to the document, from February 1, Moscow will stop supplying oil to those buyers who join the price restrictions.

At the moment, Russian companies continue to reorient their oil supplies.

As Deputy Prime Minister Alexander Novak noted earlier, enterprises have already significantly increased sales of energy resources to the countries of the Asia-Pacific Region (APR), Africa and Latin America.

  • Deputy Prime Minister of the Russian Federation Alexander Novak

  • RIA News

  • © Ivan Fedorov

However, it may take some more time for businesses to completely replace European buyers, so Russia will have to slightly reduce the volume of exports and oil production for the time being.

According to Novak, in early 2023, the production of raw materials in the country will decrease by about 5-7%, or by 500-700 thousand barrels per day.

“We believe that in the current situation, it is even possible to take the risks of reducing production, rather than be guided by the sale policy regarding the price ceiling.

Today it is $60, tomorrow it can be anything, and becoming dependent on some decisions made by unfriendly countries is unacceptable for us,” Novak explained in an interview with Russia 24 TV channel.

At the same time, against the background of the loss of the European market, Moscow is forced to provide significant discounts on its oil to attract buyers from other regions of the world.

According to the Ministry of Finance, in December a barrel of Russian crude Urals was sold at an average of $50.47.

At the same time, the cost of the reference grade Brent on the world market was about $81 per barrel, according to the World Bank.

Moreover, according to Bloomberg, on January 6, the price of Urals in the Baltic port of Primorsk dropped to $37.8 per barrel.

However, such a low cost of raw materials is true only for a small part of Russian exports, Igor Galaktionov, an expert on the stock market at BCS Mir Investments, said in an interview with RT.

According to him, shipments in other ports now go at higher prices.

  • Gettyimages.ru

  • © Thattaphon Sukborwornophat / EyeEm

As Igor Yushkov, a leading analyst at the National Energy Security Fund, explained to RT, today the final cost of Russian oil varies depending on how far the unloading port is from the Asia-Pacific markets.

For example, the transportation of raw materials from the Baltic is more expensive for Asian buyers, so Moscow has to increase the discount in this case.

“At the same time, the discount for our oil in ports in the Far East is lower.

This is precisely due to the fact that it is much faster to transport raw materials from there to Asia,” Yushkov explained.

According to the expert, as Moscow establishes new supply chains and builds up its own tanker fleet, oil production and exports from Russia will begin to recover.

At the same time, the size of the discount will have to decrease, the expert is sure.

“Nevertheless, the Russian Ministry of Energy intends to keep abreast and closely monitor the pricing situation.

The department acts as a regulator, is going to monitor how reasonable commercial companies make discounts on the sale of raw materials, and will help to reduce the size of these discounts,” Yushkov explained.

Wide choose

As Vladimir Chernov, an analyst at Freedom Finance Global, suggested in an interview with RT, already in the second half of 2023, the size of the discount on Russian Urals oil could be reduced by two to three times.

This will be partly facilitated by the growing demand for fuel in China, where the authorities are now lifting quarantine restrictions.

Today, China remains one of the key importers of Russian energy resources.

Moreover, in addition to Urals, the Asian republic is now buying other grades of oil from the Russian Federation.

In particular, according to Bloomberg, recently Beijing has increased the supply of such Arctic raw materials as Arco, Varandey and Novy Port, which are shipped from Murmansk.

“This oil is produced at the Prirazlomnoye field on the shelf of the Pechora Sea.

It is immediately loaded into tankers, which must go to the buyer.

However, since the markets of Europe are closed to us, it is logical that these deliveries go to Asia.

In addition to China, this type of raw material is now also purchased by India,” said Igor Yushkov.

It is curious that some types of Russian oil are now more expensive than Urals.

In particular, we are talking about the ESPO brand of raw materials, Vladimir Chernov noted.

“Russian ESPO oil is shipped from the port of Kozmino, which is located near Vladivostok and, accordingly, from China.

Its price is now $64 per barrel.

This is not only more than the cost of Urals, but also higher than the price ceiling set by the West,” the expert emphasized.