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At this price of oil, sanctions are not needed

Ukraine (, - Russian oil is sold for less than $60 per barrel, the limit that the G7, the EU, Australia and Norway have set for third countries. However, sanctions have nothing to do with it, experts say. Commodity prices are falling. Analysts believe that low prices may last until the end of winter.

Russian Urals oil fell to an average of $49, according to Thomson Reuters. US Treasury Secretary Janet Yellen told CBS that the price ceiling for Russian oil is still working in line with Washington's expectations.

“The first goal is to limit the income that Russia receives. The second goal is that we want Russian oil to continue to enter the market, because Moscow is a significant supplier,” Janet Yellen said.

Experts, however, doubt that the price of Russian oil was affected by the price limit of $60 per barrel, which was introduced on December 5. Global commodity prices are falling. Quotes of the benchmark North Sea Brent fell to $75 per barrel, which Urals has always traded at a discount. This is the first time in a year that this decline has occurred.

“The biggest trend in oil prices is the threat of a global recession. We see that the US Treasury Secretary predicts it for 2023. Europeans look at the recession as a fait accompli. And the same China has begun to lift quarantine restrictions, but this is happening slowly, and the country is not becoming a driver of growth in oil consumption in the world,” says Igor Yushkov, a leading analyst at the National Energy Security Fund (NESF) and an expert at the Financial University under the Government of Russia. “Therefore, there are no prospects for trade growth, the price of Brent oil and, accordingly, Urals is decreasing.”

Another factor is the repeated increase in the rate by the Fed and the central banks of countries.

“It is expected that there will be new increases. As a result, the money supply shrinks, loans become expensive and there is nothing to buy exchange instruments, including oil futures. There is no demand – the price is going down,” continues Igor Yushkov.

Meanwhile, the US authorities continue to declare the monetary policy of quantitative easing and speculators continue to bet on the fall of oil. Therefore, the downward trend will continue in the near future, adds independent industrial expert Maxim Khudalov.

“Oil is still available on the market, since the anti-Russian embargo and the price ceiling have little effect on the volume of Russian supplies, so there is no need to expect a shock deficit and the subsequent sharp increase in quotations,” the expert notes. Maxim Khudalov believes that low prices may last until the middle of the first quarter of next year, and OPEC + will take action if quotes fall below $ 50.

While the market is frozen and waiting for how the situation will affect oil production and exports in Russia. “If they go down, it will push prices up. While there was disappointment in the severity of the price limit issue. Everyone expected that it would be lower, and that Russia's reaction would be faster and tougher. The result was a ceiling of $ 60, which corresponded to the price of Russian oil. At the same time, the Russian authorities are in no hurry to respond and mild options are being discussed. Therefore, those who expected undulating Russian exports due to the fact that we will impose an embargo against supporters of the price limit are disappointed,” says Igor Yushkov.

The Russian Ministry of Finance reported that the average price of Urals oil in November 2022 was $66.47 per barrel, which is almost $10 lower than the average price in January-November. This was one of the reasons why the total deviation of actually received oil and gas revenues from the expected monthly volume in November 2022 amounted to -90.2 billion rubles. Obviously, in December, expectations will again not converge with receipts.

The Baltic ports, where oil was traditionally shipped to Europe, which banned the import of raw materials from Russia by sea since December 5, will have a special blow. Bloomberg, citing Argus data, reported that the price of Urals in the Baltic fell to $43.

“That is, a discount of more than $30. It was like that in the spring, but by December it was reduced to $18. I believe that a new cycle is beginning. Again sanctions, again problems, and again we give a big discount, which we will reduce as demand for our raw materials grows. This is not a fast process, so the discount on Russian oil may increase in the coming months,” Igor Yushkov noted.

At this price of oil, sanctions are not needed