The price of the ICDX crude oil contract for the week ending February 3 was observed to have moved down by 6% in a week, which was triggered by anticipation of various sentiments in the market ahead of the imposition of an embargo and price limit on Russian refined petroleum products on February 5. One of the main focuses is on the steps taken by OPEC+ in an effort to maintain the stability of global energy markets.
At the OPEC+ meeting (1/2) it was agreed that the alliance of 23 producing countries would keep the production policy unchanged for February, namely cutting output by 2 million bpd, as previously estimated by the market. The decision indicates that OPEC+ will not add more supply to the market, despite concerns that output on global markets will tighten if Russia cuts output while the embargo is in effect.
On the other hand, the market is also waiting for a decision to be taken by the European Union (EU) regarding the proposed price limit proposal from the European Commission of $100 per barrel for diesel and $45 per barrel for fuel oil. To be implemented, the price cap which will be enforced on February 5 must be agreed by all 27 EU member states, but as of Friday's close (3/2), there has been no indication of a deal being reached. So this has sparked doubts in the market about the planned embargo and price limit for Russian refined petroleum products.
Markets Doubt Effect of Embargo on Russian Refined Petroleum Products
The implementation of the embargo and price cap on Russian refined petroleum products, such as diesel and gasoline which took effect on February 5 has not had a significant impact on Russia's oil output as expected by Western countries and their allies. Sources from traders said that the current condition is only a shift in supply from the European market to other markets, mostly in Asia. The CEO of major Russian oil company Rosneft, Igor Sechin, stated on Monday (6/2) that Asia has now replaced Europe as the reference price for Russia's Ural crude. Trader data shows about 70% of Russia's Ural oil cargoes loaded in January were destined for India, while the rest were destined for Singapore, Malaysia, China, Emirates, Turkey, Senegal and South Korea.
Turkey Earthquake Threatens Global Oil Supply
An earthquake of nearly 8 on the Richter scale that hit Turkey and Syria on Monday (6/2), caused the BTC terminal to stop operations in Ceyhan which is Turkey's main oil export center and supplies around 650 thousand barrels of oil per day. Wednesday pending a damage assessment from the operator. Following the earthquake, the Kurdistan Regional Government (KRG) in Iraq also stopped supplying oil from Iraq's northern Kirkuk field to Ceyhan, the local ministry of natural resources (MNR) said on Monday. The Kurdistan region supplies about 400 thousand barrels of oil per day, and about 75 thousand bpd is supplied to Iraq through pipelines. MNR added that new oil exports could continue after inspection of the pipeline network was completed.
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Source: ICDX Research