Current sanctions on Russian oil cost the Kremlin €160 million ($172 million) a day. The lost profit will increase to $280 million a day starting on February 5, when the restriction will be extended to petroleum products. This is stated in the report of the Helsinki Center for Research in Energy and Clean Air (CREA). The research provides evidence of how restrictions imposed by the G7 countries and related European Union sanctions are hurting Moscow. Russia's flagship Urals crude oil is already being sold at a discount of more than 50% to world reference grades.
"The EU's oil ban and the oil price cap have finally kicked in, and the impact is as significant as expected," said Lauri Myllyvirta, lead analyst at CREA.
Researchers believe that the EU should tighten the screws even more in relations with Moscow. According to CREA, a price cap of $25–$35 per barrel of Russian crude (instead of the current $60) would still be higher than the costs of production and transportation in Russia but will reduce the Kremlin's income from oil exports by at least another €100 million a day.
"It is essential to lower the price cap to a level that denies taxable oil profits to the Kremlin and to restrict the remaining oil and gas imports from Russia," Myllyvirta believes.
The Bloomberg agency points out there is still a possibility that Russia could make export cuts that would boost global oil prices.
Global oil prices on January 11
On January 11 trades, oil prices fell against the backdrop of an unexpected build in crude and fuel inventories in the United States, the world’s biggest oil consumer, and the economic uncertainty that revived worries about future demand, Reuters reported.
U.S. WTI crude futures were down 54 cents, or 0.72%, to $74.6 a barrel, while Brent crude futures fell 50 cents, or 0.62%, to $79.6 a barrel.
Both contracts rose on January 9 and 10, rebounding from a sharp selloff in the first week of 2023.
U.S. crude oil stockpiles jumped by 14.9 million barrels in the week ended January 6. Distillate stocks, including black oil and jet fuel, rose by about 1.1 million barrels.
Analysts polled by Reuters had expected crude stocks to fall by 2.2 million barrels and distillates by 0.5 million barrels.
The oil market has been pulled lower by worries that sharply higher interest rate hikes to tame inflation would trigger a recession and curtail fuel demand. The hopes for fuel demand growth in China, which is still struggling with a massive COVID-19 outbreak, also haven’t yet panned out.