ECONOMY
Russia’s oil price plunges
January 11, 2023 - Russia’s flagship Urals grade crude oil is trading more than a third below the price of international benchmark Brent following sanctions targeting the Kremlin’s revenue from petroleum sales.
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On Tuesday (January 10, 2023), Russian President Vladimir Putin’s spokesman, Dmitry Peskov, was asked if the Kremlin was concerned about the low price at which Russia’s Urals is trading and the consequences for Russia’s budget income.
“The government, first of all, Deputy Prime Minister [Alexander] Novak, is watching the situation very closely, as [well as] the Energy Ministry,” Peskov said, according to the Russian news agency TASS.
At the end of December, Putin banned the sale of Russian oil to countries that have joined the so-called “Price Cap Coalition.” Putin’s oil ban on countries that comply with the price cap will take effect from February 1 to July 1, 2023.
The Russian move follows the start of the $60 per barrel price cap that the G7, the EU, and Australia implemented on December 5.
A key driver of prices has been the loss of the European market -- historically Russia’s top export market, buying 3.1 million barrels per day (b/d) of crude oil and feedstocks, according to the Center for Strategic and International Studies.
Russia is now at the mercy of a tiny pool of large buyers, most notably China and India. Export volumes to India topped 1.1 million b/d in December. Bloomberg reported that tankers holding some 19 million barrels of crude left ports in the four weeks to December 30, showing no clear final destination. These barrels will presumably end up in India or China.
The Price Cap Coalition is preparing to impose caps on Russian refined product exports from February 5.