Oil market scarcity
At the time, Brent crude was above $86 a barrel and up 8% from the previous week. Forecasts indicate a tightness in the oil market, with an increase in demand over supply. The Russian production cut has the potential to bring prices back to the triple-digit levels last seen in August.
A month later, Brent crude fell below $75 a barrel – for the first time since December 2021 – and was on its way to the $70 level. Forecasts of a tight market were postponed to the second half of the year, while forecasts of a $100-per-barrel crude price were revised amid fears of a slower-than-expected recovery in Chinese oil demand and fears of a global crisis following several bank failures.
The recovery in oil prices over the past two weeks has not, so far, succeeded in bringing Brent crude back above $80 – a level many see as a source of relief for most of Russia’s fellow OPEC+ group.
Energy Agency: The price ceiling drops Russia’s oil revenues to the lowest level in a year
Unilateral Russian production cuts could be more of a relief than a worry, especially for other members of the OPEC+ oil producer, of which Russia is the second largest producer.
Initially, any cut in production will be offset by lower demand from the country’s refineries, which usually undergo maintenance at the end of winter. This means that exports – which are of real importance to oil markets – may not be affected at all.
The most visible part of the trade, the volume of oil leaving Russia’s ports, has increased since the start of the year by diverting shipments previously sent by pipeline to Poland and Germany. Flows to Germany stopped at the end of 2022 and deliveries to Poland fell to about 60,000 bpd under the last remaining supply contract to Warsaw with a Russian company. This added about 500 thousand barrels per day to shipments transported by sea.
