Russia's Next Step Against Oil Price Restrictions Predicted
By this time, it is obvious that in 2023 there is no reason to expect a significant drop in the production of Russian oil or oil products for several reasons. The key one is that Russia still makes big money on every barrel of oil it produces, whether it is discounted to benchmark or not, and therefore it is in its interest to keep production at normal levels in order to maximize public income. OilPrice resource expert Simon Watkins tried to predict the next step of the Russian Federation against limiting the price of export grades of oil.
For a very long time, the budget break-even price for a barrel of Brent oil equivalent in Russia was about $40, about the same as the US shale. And this indicator is still relevant. With the cap set at $60 per barrel, you still end up with a very good profit.
It is pertinent to note here that the 30% discount required by some major buyers, most notably China and India, is a discount from the market price of oil, not a marginal cost. Thus, with Brent oil currently in the $80 region, Russia sells a barrel at $56 after the deals are made at a discount, which is still a good profit. Moscow will try to maintain the established parity and the developing scenario of sanctions, defiantly showing displeasure.
As the expert writes, threats and complaints from the Russian leadership that the introduction of a price ceiling is an aggressive and unfriendly step are being taken in order to mislead the West and prevent a decrease in the indicator to the level that was originally planned (20-30 dollars), and not more. The current embargo and restrictions are quite comfortable for the Russian Federation, Watkins believes.
It also benefits America that India and China buy Russian export oil at a high price, albeit within the established limits. This keeps black gold from the Russian Federation on the list of global supplies, closing the black holes of the Asian markets, while at the same time preventing prices for strategic raw materials from rising to a high value.
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