Russian oil export earnings decline to a two-year low, according to Bloomberg.
Over the past 13 months, the cost of Russia's seaborne crude oil exports has steadily declined, leading to a two-year low in revenues from these exports. According to a recent report by Bloomberg, the average volume of crude oil exports over the four weeks ending May 25 was 3.39 million barrels per day, a decrease of 10,000 barrels per day from the period ending May 18. Despite the lower volume, the total value of these cargoes was the lowest since April 2023, indicating a decrease in the price of Russian crude oil.
Revenue from Russian oil exports fell by 1% to $1.26 billion for the week ending May 25, Bloomberg reported. Since hitting around $1.95 billion per week in April 2024, the price of Russian crude oil has dropped by 28%, and the volume of supplies has decreased by approximately 8%. The exact factors contributing to this decline remain unclear, although the potential impact of sanctions against Russia cannot be ruled out.
The G-7 countries are reportedly considering lowering the price cap imposed on Russian oil sales. Currently set at $60 per barrel, the proposed cap would be reduced to $50 per barrel, limiting Russia's ability to sell oil using Western ships or services. This move could further impact Russia's crude oil exports and revenues.
The energy market is experiencing significant changes due to various factors, including the energy transition and weakening global demand. Crude quality and carbon intensity are becoming increasingly important as the world moves away from fossil fuels. By the end of the forecast period, Brent oil prices hovered just above $60 per barrel, reflecting the global economic trends and supply dynamics.
Without explicit sanctions or embargoes, Russia has sought to circumvent the price cap by employing a "shadow fleet" to transport oil using non-Western services. This tactic, while offering a potential way to sell oil at prices above the cap, increases operational costs and risks. Meanwhile, OPEC+ production cuts, aimed at supporting global oil prices, have also put pressure on exports.
In this rapidly evolving landscape, the future of Russia's seaborne crude oil exports remains uncertain, with fluctuating prices and the potential for continued changes in market dynamics and geopolitical influences.
The decline in Russia's oil revenues, despite a slight decrease in the volume of exports, suggests a significant drop in the price of Russian crude oil, which has fallen by 28% since April 2024. The G-7 countries' consideration of lowering the price cap on Russian oil sales could further impact the finance sector, as it may limit Russia's ability to earn profits from energy exports, particularly in the industry sector, given the ongoing sanctions and geopolitical influences.
