BAKU, Azerbaijan, May 5. If approved, the EU proposal to end imports of Russian crude oil and petroleum products by the end of the year will lead to Russia’s oil exports to fall by around 20 percent this year, which in turn would keep oil prices over $100 per barrel, Trend reports with reference to the UK-based Capital Economics research and consulting company.
The company analysts believe that unless natural gas prices plunge and/or there are secondary sanctions on Russian oil, this won’t cause major pain for Russia’s economy immediately.
“If EU member states approve the proposals, Russia’s oil exports will slump over the rest of this year given that Russia exported half of its oil to Europe before the war. There’s likely to be some increase in Russia’s oil exports to non-Western countries this year, partly because Russian crude is trading at a huge discount. But we don’t expect non-Western countries to fully make up for lower Western imports. For a start, non-Western countries won’t want to jeopardise their trading relationship with the West. What’s more, the EU has proposed a ban on members providing shipping, brokerage, insurance and financing for the transport of Russian oil, which would deter buyers,” reads the report.
Overall, Capital Economics expects Russia’s crude oil exports to fall from around 5.0m bpd before the war to 3.5-4.0m bpd later this year.
“Admittedly, Russia’s seaborne exports have been holding up well, but this is mainly oil that was purchased before the war. Despite this embargo, we have not changed our forecast of Russian exports as we had always expected lower shipments to the EU, even without a co-ordinated policy decision. Moreover, we remain of the view that the plunge in Russian exports will put a floor under oil prices and still expect the price of Brent to be around $100pb at end-2022,” said the company.
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