Axios Markets title: Russia’s energy weapon weakens
By: Matt Phillips
Date: 13 February 2023
“Markets mostly shrugged off Russia’s threat to curb crude production in response to Western sanctions, Matt writes.
Why it matters: It shows that President Vladimir Putin’s decision to invade Ukraine has left Russia with less leverage against the West than he may have once believed it had.
Driving the news: Russian state officials announced Friday that the nation plans to cut oil production by about 5% next month, in response to Western efforts to cap the prices at which Russia sells its oil.
The impact: While crude oil prices rose on the news, it wasn’t much of a gusher.
- Both Brent crude (the European benchmark) and America’s West Texas Intermediate rose about 2%, leaving prices around where they’ve hovered over the last few months.
What they’re saying: “We consider today’s news to be a significant milestone,” wrote oil industry analysts at ClearView Energy Partners, a research firm. “In today’s action, Russia is firing its own crude weapon at the West.”
But, but, but: Though Russia is an energy giant, in the face of sanctions it has shifted most of its oil exports to its relatively few remaining friends — China, India and Turkey.
- That effectively reduces the impact of any efforts to use the so-called oil weapon against its adversaries in the West, since the West buys a lot less of its oil than it used to.
Context: Last month former deputy Russian energy minister Vladimir Milov — now an opposition politician living abroad — told the Wall Street Journal that as a result of the war, “Russia will have a smaller market share in oil and gas, it will make less profit and it has lost some of its geopolitical leverage as well.”
- We recently pointed out that the country’s financial position appears to be deteriorating rapidly, thanks to a collapse in energy revenues.
- According to the Russian finance ministry, the average price of Russia’s benchmark Urals grade oil was $49.48 in January — a 40% discount to Brent crude’s $84 average for the month.
The bottom line: The lackluster response to Friday’s threats to cut crude oil output suggests its leverage over the market is also eroding fast.”
Source:
https://www.axios.com/newsletters/axios-markets-16ffd0da-f3cb-4336-85e2-828782ab7fd0.html
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