EU To Impose Full Embargo On Russian Oil Next Week, Will Send Price Above $185 According To JPMorgan
Despite the clear intentions of western government to cripple Russian energy production, loadings of Russian oil have so far been surprisingly resilient, so much so that Russia’s current account balance is at all time highs.
According to JPMorgan, shipments in the seven days to April 16 hit 7.3 mbd, only 330 kbd below the 7.58 mbd averaged in
February before the start of the war. Remarkably, JPM calculates that Russian crude exports are averaging 360 kbd above pre-invasion volumes, while exports of oil products like fuel oil, naphtha, and VGO have declined by 700 kbd (full report available to pro subscribers in the usual place).
As previously observed, the decline in product exports combined with a 200 kbd drop in Russian domestic oil demand has resulted in Russian refineries cutting runs. The volume of refining cuts in April has risen to 1.3 mbd, almost 0.6 mbd above usual April maintenance. By late March, a sharp reduction in domestic refining throughput triggered production shut-ins.
With that in mind, JPM now estimates that Russian production shut-ins will amount to 1.5 mbd in April, vs its initial forecast of 2 mbd (the forecast of a 1 mbd loss of Russian exports for the rest of the year remains unchanged for now).
Underlying JPM’s projection is the assumption that European buyers will cut their purchases of Russian oil by about 2.0-2.5 mbd by the end of the year and that Russia will be able to re-route only about 1 mbd out of that.
The three ways JPM gets to its 2.0-2.5 mbd estimate are:
- Russian crude spot contracts account for about 1.8 mbd of total exports, while about 0.3 mbd of products are sold on spot terms, giving us a likely disruption of 2.1 mbd,
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