The US sanctions imposed at the end of October against the largest Russian oil companies Rosneft and Lukoil will come into full effect in ten days, but it is already clear that they are having a strong impact on the Russian economy, noted Circle K.
As a result of the sanctions, supplies of Russian petroleum products to the global market will decrease; on the other hand, the blocking of these companies will lead to an increase in prices for finished products.
According to Indrek Sassi, head of fuel pricing at Circle K, the effect of the announced sanctions is already noticeable. For example, the activities of the Finnish subsidiary of Lukoil, Teboil, have been blocked; operations at the Iraqi oil field West Qurna-2, where Lukoil holds a significant stake, have been suspended and force majeure has been declared as Iraq has frozen all payments to the company; Bulgaria is placing the largest oil refinery in the country, owned by Lukoil, under state control; the sale of Lukoil's foreign assets to the Gunvor group, which is referred to as a Kremlin puppet, has been blocked; the fate of the Romanian refinery Petrotel-Lukoil and the Zeeland plant in the Netherlands is also in question.
"The US step to impose sanctions against Rosneft and Lukoil is significant, as it concerns the two largest Russian oil giants, and these measures will have a substantial impact on Russian oil exports," Sassi explained. "The real impact of the sanctions will depend on how many foreign companies and oil buyers will avoid cooperating with these enterprises; however, the steps already taken confirm that the effect of the sanctions will be widespread."
At the same time, a more decisive cutting off of Russian oil from the global market could lead to an increase in oil and petroleum product prices. The Turkish fuel supplier Guzel Enerjii has already warned its customers about an upcoming increase in diesel prices caused by anti-Russian sanctions, which have led to supply disruptions and increased insurance and financing costs.
"The price of crude oil has slightly decreased since the beginning of the month, and Brent crude is trading at around $64 per barrel; however, prices for finished products are on the rise. The increase in prices is driven by rising demand, US and EU sanctions against Russia, successful Ukrainian attacks on Russian oil industry facilities and import terminals, as well as a period of maintenance at refineries in Southern Europe, which has resulted in less finished product entering the market," Sassi listed.
Sanctions against Russian oil have forced Chinese and Indian refineries to exercise greater caution, resulting in them seeking new suppliers. For example, the Chinese refinery Yamchang Petroleum announced a suspension of purchases of Russian crude oil.
At the same time, with the arrival of autumn, there is a slight decrease in consumption worldwide, which may slow down price increases. Saudi Aramco has lowered the official price of Arab Light crude oil for its Asian customers for December delivery, which is a sign of low demand for oil in the Asian region.
Leave a comment