BAKU, Azerbaijan, March 9
By Leman Zeynalova – Trend:
Russian oil companies could offer sweeteners to buyers to make their barrels more attractive, for instance shifting cargoes from FOB to CFR basis, Trend reports with reference to Oxford Institute of Energy Studies (OIES).
“Also, in response to more extensive self-sanctioning, Urals and ESPO could be offered at discounts so large that cargoes would eventually clear, potentially as masked cargoes or via ship-to-ship transfers. But there are limits to this strategy given the large volumes of Russian exports and the intensification and widening of sanctions,” said the Institute in its latest report.
OIES believes that in the current environment of ever rising tensions, one should also not also exclude the possibility that in an escalation situation where Russia struggles to clear its barrels, weaponizing energy becomes the next chapter in Russia’s ongoing standoff with the West.
“As these are still early days, a scenario in which Russian oil supplies get disrupted in a sudden manner should also be considered. This will exert significant pressure on both market balances and prices in the near-term and for most of 2022. Estimating that 4.2 mb/d of Russian crude supplies are at an immediate risk, the current plan of OPEC+ plan of returning production of 2.94 mb/d between March and December, Iran fully returning to the market (+1 mb/d) and non-OPEC production growth particularly in North America accelerating (+0.6 mb/d), these combined supply responses can help fill the potential supply gap but only by the end of the year. The planned SPR releases will offer little support to a potential shortfall. But in such scenario, demand responses will also play their role,” reads the report.
OIES estimates some 1.18 mb/d of global demand to be at risk between 2022 and 2023 (excluding oil substitution), with the negative impacts of the Russia-Ukraine crisis on global growth and oil demand extending beyond the short-term.
“In terms of products, the market and refiners appear less flexible faced with constraints both in terms of costs and feedstock availability. Also, the impacts of the current shock will extend beyond the short-term and beyond balances and prices. The recent crisis will elevate energy security (including oil security) in policy makers’ agenda with long-term consequences for governments’ energy policies including their energy transition.”
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