This delicate balancing act was acknowledged by US Treasury Secretary Janet Yellen that a price ceiling in the range of $60 pb WTI would give Russia an incentive to keep producing oil and would equate to around $68 pb Brent given the of recent US history. $8 pb Brent premium over WTI. The final price cap for Russian oil will be decided by December 5, when the European embargo on Russian oil and related restrictions on shipping and insurance of marine oil are due to come into force. Given the apparent ideological duality at play in the conception of this oil price ceiling, it is far from certain that it will be strictly enforced. That is, since the G7 does not want to stop all oil exports from Russia, but simply limit how much revenue it can make from each barrel, the question for global oil markets remains how much oil can Russia manage to export even with a price cap in the game? In general oil market terms, this is key, as Russian oil exports leaking into the global market at prices above the oil price ceiling will feed into the global oil supply and demand mix, which in turn will feed prices. The answer to this question largely depends on shipping and the Russia-Iran-Iraq-China corridor. First, there is the question of how many ships Russia can afford to transport its oil. Several senior oil industry sources in the U.S. and European Union energy security spheres, who were spoken to exclusively by OilPrice.com last week, believe that Russia could very quickly secure at least three-quarters of the shipping that required to transport its oil as usual to established buyers and up to 90 percent within weeks after that. Before the invasion of Ukraine, according to IEA data, Russia exported about 2.7 million barrels per day of crude oil to Europe and another 1.5 million bpd of petroleum products, mainly diesel. More generally, at the end of January this year, also according to the ILO, Russia’s total global oil exports were 7.8 million bpd, two-thirds of which were crude and concentrate. Therefore, using the likely scenario above, global oil markets would only lose between 0.78 and 1.95 million barrels per day of pre-invasion Russian oil levels, even with the cap, regardless of all others factors. Given the vast fleets of oil tankers operated by Russia, China, India and Iran itself, there would be no shortage of ships at its disposal and the commonly cited “problem” of shipping and cargo protection and indemnity insurance would be amply covered. easily by all the countries mentioned, as it was when such maritime security-related sanctions were imposed on Iranian oil tanker fleets by the US Second, the Russia-Iran-Iraq-China corridor also offers several other mechanisms for transporting oil in a sanctions environment. Iran, in collusion with Russia and China, and using Iraq as a conduit when necessary, has had no choice but to develop its own methods of circumventing the sanctions since 1979, at which it has become so adept that it is matter of national pride. higher levels. In December 2018 at the Doha Forum, then-Iranian Foreign Minister Mohammad Zarif stated that: “If there is an art that we have perfected in Iran, [that] we can teach others at a price, it is the art of evading sanctions.’ Towards the end of 2020, Iran’s then oil minister Bijan Zangeneh himself added a small detail to such a tried and trusted method: “What we are exporting is not in the name of Iran. Documents change over and over again as well [the] Standards.” As also fully detailed in my latest book on the oil market, shipping-related methods of circumventing sanctions are quite simple, involving turning off – literally by simply flipping the switch – the “automatic identification system” on vessels carrying Russian oil, as he simply lies about destinations on shipping documents, as Zanganeh reports. In Europe, Iran has used this method to move oil to some of the less tightly controlled southern European ports that require oil and/or oil trading commissions, including those of Albania, Montenegro, Bosnia-Herzegovina, Serbia, Macedonia and Croatia. From there, the oil was easily transported to Europe’s biggest oil consumers, including through Turkey. For Asian-bound shipments, the reliable oil methodology imposed by Iran, also available on Russian oil, reportedly implicates Malaysia (and to a lesser extent Indonesia) in promoting oil exports to China, with China-bound tankers getting involved at sea, or transfers of Iranian oil just out of port on tankers flying other flags. It is pertinent to note at this point that there are several Russian crude grades that are also extremely close in specification to comparable grades in Iran, and therefore Iraq, with which Iran shares many large reservoirs and oil fields. If the G7 decided to strengthen its sanctions against Russian oil exports, then Moscow and Tehran could agree to a swap deal of one kind or another that would see Russian oil go wherever Iran needed it, with a “Iraqi” compensatory amount. (read “Iranian”) oil goes where Russia wanted, since Iraq’s oil is not subject to sanctions. This key strategy of “branding” Iranian oil as Iraqi oil has seen huge volumes of Iranian oil move through Iraq’s existing crude oil export infrastructure, including very large crude carriers loaded in and around the southern export hub of Basra. It has also been direct to southern Europe via the Turkish port of Ceyhan via crude oil pipelines passing through Iraq’s semi-autonomous Kurdistan Region, although these have been subject to continuous disruption for years, and there are also plans for further pipelines from Iraq to Jordan and Syria. OilPrice.com understands from sources close to Iran’s Oil Ministry who spoke exclusively last week that there has been a “significant change” in this previous long-standing agreement to limit crude oil flows coming from Russia, Iran and Iraq – meaning that Russian oil Exports were prioritized over Iranian/Iraqi oil to Europe – during the very recent trip of the Russian Deputy Prime Minister, Alexander Novak. “The groundwork for a new regulation on crude oil flows originating from “Russia/Iran/Iraq was laid in January [2022] meetings [in Moscow, when Iranian President, Ebrahim Raisi – the first visit of an Iranian president to Russia in almost five years at that point]and these were discussed further in the last two weeks,” the source told OilPrice.com. By Simon Watkins for Oilprice.com More top reads from Oilprice.com:
