Market Dynamics Work in Russia's Favor — For Now

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Eight months after the introduction of the EU embargo and G7-mandated price cap, Russian oil is feeling plucky. Export volumes are lofty despite the loss of the European market, and discounts are slowly coming in. The anticipated sharp rise in global demand in the second half of the year, together with proactive supply management by Opec-plus, should buttress this dynamic. Exports in the first half of 2023, including those to Belarus, which are now considered a state secret, were 5.1 million barrels per day, up by 100,000 b/d from the average level in 2022, according to Energy Intelligence’s data. If pipeline exports to Europe tanked by 500,000 b/d last year to 280,000 b/d in January-June, then seaborne shipments to global markets have risen by 450,000 b/d to 3.7 million b/d over the same periods. Discounts, meanwhile, have narrowed from the $30-$35 per barrel on Urals in December 2022-February 2023 to $20/bbl in June, according to official Russian data. The discount on Urals delivered at port in India, now Russia’s largest buyer, has fallen from $16/bbl in February to around $8/bbl last month. Also, it is worth noting that some Indian buying has moved from spot to term contracts, while many shipments are paid in United Arab Emirates dirhams and Chinese yuan, both of which are strategically supportive for Moscow.

Crude Oil, Oil Trade, Oil Supply, Oil Prices, Sanctions, Ukraine Crisis
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