Thus far, the value cap on Russian oil appears to be delivering the specified impact. That’s one technique to learn the information this morning that Urals crude continues to be shipped to India.
The cap’s goal was twofold: to make sure that provide from Russia — seaborne exports often account for some 4 million barrels a day (Mb/d) out of a complete world demand simply shy of 100 — wouldn’t be overly disrupted by the EU embargo, in impact from December. On the identical time it wanted to pressure Russia’s coffers.
On the primary entrance, issues have labored fairly properly. Preliminary knowledge for December does present a decline of almost a fifth in Russian oil exports. However within the context of softer demand, because of slowing economies, the broader market has not seen. The value of benchmark Brent oil was at $79/bbl on Friday, down from $120/bbl-plus in June.
In the meantime, the low cost at which Urals oil trades in contrast with Brent has widened to essentially the most this yr, utilizing knowledge from Argus. That ought to improve the strain on Russia. At $60/barrel for Urals crude, on Bernstein estimates, subsequent yr’s funds deficit will likely be $68bn, or 3.9 per cent of GDP. In the meantime, Urals at the moment trades round $47/barrel.
The third — unintended — consequence of the ban is a windfall for Asian economies. Even assuming it prices $5/bbl to get Russian oil to India, Urals continues to be a discount. Refineries there’ll profit. Reliance Industries, with a market worth of over $200bn, owns the 2 largest refineries in India, of which one is targeted on export.
That’s useful given excessive European diesel costs. Already, tight provide of the gas has pushed the European diesel crack — the unfold between crude and diesel — to $40 per barrel. Indian refineries are exporting round 170 000 barrels of diesel a day to Europe, in line with Janiv Shah at Rystad Power, about 3 times the prewar run charge.
Because the European ban on Russian merchandise kicks in — and the continent loses 30 per cent of its diesel imports — this commerce will solely get extra enticing.
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