The nation has been rerouting increasing volumes of its oil to India and China amid rising political tensions with Europe, one of its biggest markets, due to the war in Ukraine. In the week leading up to December 9, Moscow sent 89 per cent of its crude, amounting to about 3 million barrels a day, to Asia.
But shipments to Asia are now proving more difficult as European sanctions make it tougher for traders to find enough insured vessels to transport Russian crude.
According to Rystad Energy, however, the risk of a sharp decline in Russian crude production was more acute in mid-2022, when global supplies were tighter.
“As long as US shale performs and delivers growth, we see the market moving towards a more normal equilibrium,” Louise Dickson, a senior analyst at Rystad Energy told Insider.
Also, with global supplies expected to get squeezed, crude prices will likely soar past $100 a barrel next year, according to Saxo Bank’s Ole Hansen and UBS Global Wealth’s Staunovo.
“The embargo on seaborne crude from now and fuel products from February will likely have a price-supportive impact on markets,” said Hansen, head of commodity strategy at Saxo. The supply disruptions should add to the “expected tightness when demand picks up in China following the current virus surge,” he added.
Those risks raise the likelihood of oil prices topping $100 a barrel, according to Hansen.
“Following a soft first quarter, I see the price of Brent returning to a $90-100 dollar range. What happens later will depend on the strength of an incoming economic slowdown,” he added. UBS’s Staunovo echoed his view.
Oil prices have trended upward since mid-December after months of declines as supply comes under pressure following EU sanctions on seaborne Russian crude and threats by Moscow that it will slash production in retaliation to the G7-imposed price cap.
Brent crude, the international benchmark, has risen by more than 10 per cent from this year’s lows reached earlier in December, standing at around $83 a barrel.
“The real test will come on 5 February with the implementation of a products ban,” Rystad’s Dickson said.
SOURCE: THISDAY
