Oil Down 2% as Putin Lets Russian Energy Firms Set Prices and Exports By Investing.com

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Posted by Parani Krishnan

Investing.com – The Kremlin’s official position is that it will not abide by the West’s limits on Russian oil prices.

But in fact, President Vladimir Putin’s administration allows Russian oil companies to sell as many barrels as they can at any price they can get.

This effectively means that companies can apply whatever discounts are necessary to deal with the oil in their possession, with G7 prices already capped for Russia’s Urals barrel at between $25 and $35 less than global benchmark Brent crude.

Monday’s media headlines indicated discrepancies between Russian government policy and actual activity in the physical oil market. This sent crude oil prices lower again, after Friday’s decline came on the back of a rally over the past two weeks.

New York-traded West Texas Intermediate crude, or West Texas Intermediate, settled down $1.78, or 2.2%, at $77.90 a barrel after a session low of $77.75.

The price of Brent crude, traded in London, settled down $1.76, or 2%, at $84.90 a barrel. The session low was $84.33.

The reversal came after the Russian government confirmed it was “banning oil exports that adhere to Western price caps,” according to a headline from Reuters.

However, this was followed by two more news releases that said that “the Russian government has assigned oil companies to supervise the drafting of contracts” and that “the Russian government has not set a minimum price for oil exports.”

said John Kilduff, partner at New York Energy hedge fund Again Capital.

“This is a serious problem for so-called cooperation within OPEC+, which is based on keeping Saudi and Russian exports at the lowest possible level and supporting prices at the higher end.”

The headlines on Russia came ahead of a meeting of OPEC+, the 13-member Saudi-led Organization of the Petroleum Exporting Countries (OPEC) with Russia and nine other oil-producing allies, on Wednesday.

OPEC+ is expected to leave its production targets unchanged from December levels at the meeting. Oil bulls usually look to OPEC+ to announce cuts when the group meets. Without it, crude oil prices are likely to drop.

Since a G7 price cap of $60 per barrel for Russian oil came into effect on Dec. 5, it has added to OPEC+’s woes trying to rally a market already in recession due to mixed signals about demand from top importer China and concerns. of the impending recession in the United States and Europe.

While the Putin administration has publicly refused to set a G7 ceiling, it hasn’t really been able to fight it.

And because they’re getting less money for their oil now, the Russians are shipping more barrels these days than the Saudis want. Those barrels are mainly destined for two destinations – India and China, the only countries the US allows to buy sanctioned Russian oil without questions.

Not only does increased exports from Russia spoil the OPEC+ goal of keeping production tight, but it also hurts the Saudis because India and China were also the biggest markets in Asia for the state oil company in Riyadh. Aramco Saudi Arabia (TADAWUL:).

India bought an average of 1.2 million barrels of Russian Urals per day in December, which was 33 times more than the previous year and 29% more than in November. Discounts for the Urals in Russia’s western ports for sale to India under some deals have widened to between $32 and $35 a barrel when freight is not included, according to a Reuters report from Dec. 14.

Another Reuters report said that China pushed its biggest cuts in months on Russia’s Espoo crude in December, amid weak demand and weak refining margins. ESPO is a grade that is exported from the port of Kozmino in the Russian Far East, and Chinese refiners are dominant customers for this.

As if that wasn’t enough, a Reuters report last Friday said that Russian oil shipments from Baltic ports are set to rise by 50% in January from December levels. Russia loaded 4.7 million tons of Ural and Kepko from Baltic ports in December. The increase in January comes as sellers try to meet strong demand in Asia and take advantage of higher global energy prices, the report said.

The Saudis, for their part, have lowered prices for their Arab Light crude to Asia to try to stay competitive amid being ruthlessly undermined by the Russians – who are supposed to be their closest ally within OPEC+.

Separately, the Kremlin said in a statement on Monday that Putin had a phone call with Saudi Crown Prince Mohammed bin Salman earlier in the day “to discuss cooperation within the OPEC+ group of oil-producing countries in order to maintain oil price stability,” according to Reuters. . . No details were provided.

The G7 will introduce a price cap on the 5th of February on refined oil products from Russia. No one knows what effect this will have on the Kremlin.

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