She didn’t wait Russia’s response to the price caps set by Europe after the invasion of Ukraine. Moscow could cut oil production by 5%-7% in early 2023 as a countermeasure to Western caps on its crude and refined products and cut off sales to states that support them, Deputy Prime Minister Alexander announced. Novak, specifying that the cuts could reach 500,000-700,000 barrels per day.
Brent soars above 83 dollars, a bit suspicious timing
One fears drop in Russian crude oil supply and Brent oil prices soared by 2.73% to 83.19 dollars a barrel (+2.32% to 79.29 dollars a barrel the WTI), with operators also attentive to the wave of frost arriving from Arctic which threatens travel during the holidays (more than 4,400 flights were canceled in the United States in the space of two days) and gasoline consumption. For Spi Asset Management’s Stephen Innes, the Russian threat comes as the United States is facing an intense one winter storm, leaving some traders skeptical as to whether the warning is real or an attempt to drive up oil prices. “The timing hasn’t gone unnoticed by oil industry players,” Innes noted. Novak then claimed the fact that, despite the European sanctions, energy exports from Russia are in demand all over the world also thanks to the fact that Moscow has diversified its buyers. Furthermore, he remains convinced that it is difficult to ensure global economic development without Russian energy.
China the biggest wild card in the oil market
The biggest wild card in the oil market is China and optimism is still strong that reopening will continue and eventually lead to higher demand for crude oil, said Edward Moya, an analyst at Oanda, who said OPEC+ should have an easy job over the next couple of months as it remains nimble and ready to adapt to whatever trajectory of demand for black gold. According to the Oanda expert, WTI crude appears to have a floor at the level of 70 dollars a barrel and an initial resistance at 80 dollars a barrel, at 83.50 dollars a barrel thereafter.
The stakes of the EU
It should be recalled that the European Union, the G7 and Australia introduced an oil price cap of $60 per barrel on December 5, in addition to the European Union’s embargo on imports of Russian crude by sea and to similar commitments by Great Britain, Canada, Japan and the United States. Only later, after several pushes and pulls, did Europe fix a ceiling on the price of European natural gas. A ceiling that can be activated for twenty days, starting next February 15, if the wholesale price exceeds 180 euros per MWh for three working days and which will be 35 euros higher than the price of liquefied natural gas on global markets.
Medvedev: price cap on European gas stupid
A gas price cap that the number two of the Russian Security Council, Dmitri Medvedev, has defined as “stupid” for two reasons. Firstly, as for oil, it is not dictated by economic logic, “but by a hatred of the zoology towards Russia based on the maniacal thesis: the Russians are to blame for everything”. That is, “it is a non-market measure”. Medvedev on his Telegram channel said he was convinced that between caveats and numerous exceptions “it seriously won’t work“. Secondly, “it is the result of the EU’s powerlessness to influence the situation” and ultimately, concluded Medvedev, “gas prices will remain at a very high level for European consumers”. But it is not so seen that even today the price of European natural gas falls by 9.45% to €83.25 per MWh, thus remaining below €100 per MWh. (All rights reserved)