Oil is the cheapest since the beginning of the year despite problems with supplies from Russia

Since last week, prices have been affected by the European embargo on Russian oil, as well as the maximum price imposed by the G7 on economically advanced countries. Unwilling to have Western nations dictate the selling price of its oil, Russia has threatened to cut off exports to any country that meets the price cap.

As soon as the cap went into effect, some deliveries from Russia started to stall due to a long line of tankers forming in the Bosphorus. In connection with the ban on the import of Russian oil into the European Union and the setting of a maximum purchase price, Turkey has introduced stricter rules for transit.

The above circumstances under normal circumstances would drive up the price of oil. However, the price is falling, North Sea Brent crude oil is currently trading around $79 and US WTI light oil is just below $75 a barrel. Last week, the price of both contracts fell to their lowest this year.

The EU has banned oil imports from Russia, the world’s biggest exporter, to punish Moscow for its military incursion into Ukraine. And so Russian President Vladimir Putin will no longer receive dollars for her to finance his military operation.

However, Brussels makes exceptions to the sanctions. At Washington’s insistence, for example, the EU scrapped a clause in its sanctions that would have banned ships forever from receiving European shipping services if they breached the cap. The sentence was reduced to a 90-day suspension.

“Russian supplies to the market remain the highest for the year,” said OilX analyst Florian Thaler. According to him, any decline will only be noticeable in the first quarter of next year.

The OPEC+ group announced in early October that it will cut oil production by two million barrels a day. But the actual cuts are smaller. Partly because some producers, such as Angola and Nigeria, have previously had difficulty meeting quotas. In practice, there are not two, but only one million barrels of oil on the market, analysts say.

While previous traders were concerned about supply shortages, they are now concerned about demand. The major Wall Street banks are sounding alarms about the prospects for the world economy for next year.

However, oil prices could change direction, writes the FT. The drop in deliveries from Russia should be reflected next year. Even weak demand from China, the world’s largest oil importer, won’t last forever, they say.