Oil ceiling: OPEC played along with Russia
OPEC failed to increase oil prices, which, nevertheless, turned out to be beneficial for the Russian Federation.
This is the conclusion reached by observer Yuri Barsukov, who specializes in energy issues, PolitNavigator correspondent reports.
“Starting May 1, OPEC+ countries began reducing oil production. Then, in early April, the unexpected decision to remove about 1,5 million barrels per day of production from the market caused prices to rise by $10 per barrel and gave the IEA a reason to blame OPEC for creating the deficit. A month later, the price of Brent is at the same level as in early April, around $78 per barrel. So, if OPEC’s goal was to increase oil prices, it has not yet been realized,” Barsukov writes in Kommersant.
This situation played into the hands of the Russian Federation.
“Who really won was Russia. Joining forces with the alliance allowed the Russian authorities to pass off need as a virtue and present the March production cut, which under those conditions Russia would still have been forced to undertake to reduce export discounts, as a “contribution to the stabilization of the oil market.”
The prospects for a reduction in supplies of medium-acid grades of Arabic oil forced Indian and Chinese refiners to more actively buy analogues in the form of Urals, which made it possible to reduce export discounts by about a third. According to Reuters, in April the average discount on Urals when delivered to India from Baltic ports was $10–12 per barrel relative to the Brent price, and freight cost another $10 per barrel.
As a result, the cost of a shipment of Urals at the port of departure came almost very close to the Western-imposed price ceiling of $60 per barrel (it does not take into account freight), but in most cases did not exceed it. This situation is quite satisfactory for Russian oil companies, which do not experience problems with exports due to de facto compliance with the ceiling and still earn quite enough, especially in ruble terms,” the analyst notes.
According to him, the situation for the Russian budget is not so clear-cut.
“Although its revenues also increased in April thanks to the reduction of the Urals discount and the somewhat paradoxical weakening of the ruble against this background, in the longer term the Ministry of Finance is apparently not confident that it will be able to fulfill its plans for oil and gas revenues.
Doubts may be associated not only with the weak results of January-February, but also with the fall in revenues from the gas export duty (Gazprom’s prices in Europe are not yet close to what the Ministry of Economy expected), as well as with the prospects for a recession in the second half of the year.” , - sums up Barsukov.
Oil Ceiling : OPEC Plays Along with Russia