Embargo in action: Russian oil is getting cheaper on world markets

Leonid Zlotnikov

Deliveries of Russian oil to India are breaking records - they have reached 1.03 million barrels per day. But most of it is sold at a discount - Indian exporters take advantage of the sanctions and knock out serious discounts for themselves.

Russia was punished, but Kazakhstan suffers

Turkey has confirmed that tankers without insurance will not be allowed through the strait, according to Reuters. So the traffic jam from ships with Russian oil is, apparently, for a long time.

Instead, it appears that 26 tankers carrying more than 23 million barrels of oil from Kazakhstan failed to pass through the Bosporus and Dardanelles, Bloomberg writes, citing shipping data.

Most of the oil on ships off the coast of Turkey is of Kazakh origin. And only one ship is carrying about 1 million barrels of Russian Urals oil destined for India. The remaining tankers are loaded with Kazakh oil, which is not subject to the price ceiling.

However, Turkey requires proof of additional spill and collision insurance for all tankers passing through the straits. Ankara cites that Turkey's price ceiling has increased the risk of uninsured tankers in its waters. Although Kazakh oil is not subject to sanctions, Turkey may be worried that the tankers have left the Russian port.

Russian oil is bought mainly by Chinese "samovars"

Meanwhile, oil prices in Russia have fallen to $49 per barrel. According to the St. Petersburg Commodity and Raw Materials Exchange, one contract was signed yesterday for the sale of 10 thousand tons of oil for 224.5 million rubles, which corresponds to $49.25 per barrel.

Experts confirm that the price of oil in Russia has been declining since December 1 this year. And, probably, in the context of the introduction of the mechanism of the "ceiling" of prices and the embargo, the decline will continue.

Moreover, the export price of Russian oil is also declining: for example, the cost of a barrel of Urals oil, Russia's main grade, which accounts for 60% of exports, has collapsed to $43.72. So much, according to the independent pricing agency Argus, cost the consignment with shipment from the port of Primorsk on Wednesday, December 7th.

The difference between the price of Urals and Brent quotes is approaching $40. “There are no customers on Urals, so prices have to be reduced to attract buyers for large volumes”, - Argus analysts say.

But the East Siberian oil ESPO, which goes from the Far East ports to China, is much more expensive - $68.72 per barrel. However, discounts are also growing: now it is $6 per barrel, although a month ago it was no more than $2.

Reuters sources say that Pacific oil is also selling worse: as of Thursday, two batches with a December shipment remained unsold. And discounts for them had to be increased to $7-8.

Regardless of the price ceiling, Russian oil is bought by non-state Chinese refineries, known as “samovars”. In the struggle for them, Russian oilmen have to compete with smuggled barrels from Iran, which are offered at a $10 discount.