Putin is trying to undermine the ceiling on oil prices as global energy markets collapse

Russia’s announcement of an oil export ban on countries that adhere to the Group of Seven Ceiling price It is the latest sign that we are entering a new era for global energy markets, according to analysts.

But they also noted that it is unlikely to have a short-term impact on oil prices, as markets take their cues from data and concrete actions rather than words.

The price cap was imposed on December 5th and requires traders using Western services such as sea routes, insurance and financing to pay no more than $60 per barrel for Russian seaborne oil. Urals crude is currently trading at around $50 a barrel, according to Finnish refiner Neste.

Russia On Wednesday he said That starting February 1, it will stop crude oil and products from it for five months from any country that adheres to the cap, with a separate ban on refined oil products going forward.

Dan Yergin, vice president of S&P Global, told CNBC’s “Squawk Box” on Tuesday that despite doubts about whether the program will work, leaders have found a way to keep oil flowing into the market while reducing Russian oil revenue.

But as a result, he said, we now have “an even more politically charged and divided oil market.”

“For the last 30 years, since the collapse of the Soviet Union, we’ve had a world market in which oil moves largely on an economic basis, with the exception of Iran and Venezuela.”

“But we now have what I call a divided oil market where Russian oil can’t go to its biggest market, which is Europe, and the markets are divided and the oil is now flowing east.”

The next cycle will be in the oil market

European countries are scrambling to find alternative sources of oil and gas and new energy security solutions in the wake of Russia’s unprovoked invasion of Ukraine in February. European Union It obtained 14.4% of its petroleum oils from Russia in the third quarter of 2022, down 10.5 percentage points year on year, as imports from the United States, Norway, Saudi Arabia and Iraq increased.

A German government spokesman told Reuters on Wednesday that banning Moscow would have “no practical significance” for its economy, which is the largest in Europe.

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdowne, said the ban would “exacerbate supply concerns”. Comes as China’s reopening prepares to increase demand for oil, she told CNBC by email, oil prices are likely to remain high.

However, she added, “To some extent, export bans will actually be priced in — Russia easily putting pressure on countries that impose unhelpful policies is not a new or unexpected tactic. The shock in oil prices we saw today is not as bad as it could have been.” It is likely to subside, at least in part, in the coming weeks.”

Bill Weatherborn, a commodities expert at Capital Economics, agreed that the immediate market impact would be limited because the move had been threatened by Russia for some time.

He also said that this would be the case because the United States and Europe had already banned seaborne imports of Russian crude oil; Urals crude still trades below $60, so India and China can continue importing without falling into the cap trap.

stage of prosperity

The EU embargo on Russian seaborne oil, an oil price cap and a Russian export ban will be the most significant factors affecting supplies next year, Bob McNally of Rapidan Energy Group told CNBC’s “Squawk Box Asia,” presenting a “completely new” scenario.

It is expected that the year 2023 and the following years will witness continuous fluctuations in the oil markets. Brent crude futures are currently trading around $84 a barrel, close to where they started the year, but they have been volatile at the same time, approaching $140 a barrel in daily trading in March and rising above $120 a barrel in June.

McNally believes that the market is ending a roughly seven-year slump characterized by oversupply, and is on the slopes of a new multi-year boom that will see stronger-than-expected demand. It will happen amid geopolitical and macroeconomic uncertainty, he said, and OPEC+ will struggle to balance the market.

The energy consulting firm says 2023 is likely to be the year

With Russia remaining the world’s largest oil exporter of crude and refined products combinedthe effects of the new blockade could be enormous.

But for now, McNally said, markets have a “boy who cried wolf” mentality after warnings that Russian supplies would be cut off in March 2022 drove up prices, but they didn’t materialize.

“The market is in a bit of a forgiving mood regarding Russia, saying we’ll believe it when we see it,” McNally said.

He added that Russian seaborne crude oil exports fell about 24% month-on-month in December – “so it’s starting to happen, but the market will wait until it can see it before pricing it and reacting to it.”

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