BAKU, Azerbaijan, March 7. Europe will see greater physical disruptions in crude oil supplies in 2023, Trend reports with reference to Fitch Solutions.
“While Russia’s crude exports have held up relatively well since
the invasion, we expect to see greater physical disruption over
2023, as the combined impact of the EU’s fuel and crude import bans
(the latter imposed in December 2022) and the G7
price cap take hold,” the company said in its latest report.
Moscow itself has pledged a 500,000b/d cut in production from March and up to a 25 percent decrease in exports from its western ports. The market reaction to the news was muted. In part this may reflect the fact that declines had already been expected and were in effect priced in.
“However, we also take it as indication that, after a turbulent year, market participants have become increasingly desensitized to risks stemming from Russia. Russian risk premia were a key driver of the price gains seen in 2022 and the narrowing of these premia, which looks to be greater than we had previously anticipated, has informed the downward revision made to our Brent forecast this month. We would also note that the risks to our outlook on Russian oil production are skewed firmly to the upside, with 2023 growth currently set at steep 9.3% y-o-y contraction,” reads the report.
Meanwhile, Fitch Solutions notes that OPEC continues to evince a preference for prices over production, holding its current 2mn b/d cut in place.
“At around 800,000b/d, the effective cut was far lower, but nevertheless substantial, and the group has since indicated that it intends to hold the cut in place until the next scheduled OPEC+ meeting in June and potentially far beyond. Continued strong compliance with the deal by the group’s cornerstone Middle Eastern producers, combined with ongoing involuntary production declines among its African members, should see the group’s output remain heavily constrained over the course of the year.”