In a report despatched to Rigzone on Friday by Natasha Kaneva, head of world commodities technique at J.P. Morgan, analysts on the firm, together with Kaneva, highlighted that the “oil glut allow[d]… harder sanctions”.
“WTI [West Texas Intermediate] costs falling into the $50s created a chance for the Trump administration to step up financial measures in opposition to Russia and pursue a extra assertive method to sanctions,” the J.P. Morgan analysts mentioned within the report.
“Mirroring final week’s motion by the UK, the U.S. introduced on Wednesday sanctions in opposition to Russia’s largest oil producers, blacklisting state-run Rosneft and privately held Lukoil, in addition to their subsidiaries,” they added.
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“Till now, the U.S. has shunned sanctioning Russia’s main oil producers, viewing it as a ‘nuclear choice’ as a result of considerations that their dimension might set off a spike in oil costs and destabilize world vitality markets,” they continued.
Within the report, the J.P. Morgan analysts famous that flows in danger are materials.
“Collectively, these two corporations account for almost half of Russia’s crude manufacturing and an identical share of its exports,” they mentioned.
“With Wednesday’s announcement, all 4 of Russia’s largest oil corporations – Rosneft, Lukoil, Gazprom Neft, and Surgutneftegas – are actually topic to U.S. curbs, following earlier measures imposed on Gazprom Neft and Surgutneftegas by the Biden administration in January,” they added.
“In impact, 70 p.c of Russia’s 2024 manufacturing and exports are actually beneath sanctions. Transactions involving Rosneft and Lukoil have to be wound down by November 21. In a coordinated transfer, the EU additionally unveiled its nineteenth package deal of sanctions, additional concentrating on Russia’s vitality revenues,” they continued.
The analysts went on to state within the report that the effectiveness of those measures will rely upon three key elements, “how properly they’re enforced; the response of main gamers in India and China; and Russia’s skill to bypass the sanctions, because it has performed prior to now”.
“Total, sanctions are more likely to end in secure Russian export flows however narrower revenue margins, as elevated logistical and fee complexities might cut back profitability and immediate Russian producers to supply deeper reductions on their merchandise,” the J.P. Morgan analysts said.
In a analysis word despatched to Rigzone by the HSBC crew on Friday, HSBC Senior World Oil & Fuel Analyst Kim Fustier outlined that the brand new U.S. sanctions on Rosneft and Lukoil “represents a significant step-up in U.S. stress on Russia and is the most important set of Western sanctions since late 2022”.
“We predict the brand new U.S. sanctions coupled with the EU’s 18th and nineteenth sanctions packages might result in internet provide losses from Russia of a number of hundred thousand barrels per day, although it’s too early to quantify them,” Fustier added.
In a separate analysis word despatched to Rigzone by the Saxo Financial institution crew on Friday, Ole S. Hansen, Saxo Financial institution’s Head of Commodity Technique, said that “per week in the past, the dominant narrative in oil was oversupply”.
“Tankers at sea had reached pandemic-era highs, bodily differentials had been comfortable, and front-month Brent traded close to key help at $60,” he added.
“Nevertheless, what began as a small restoration after merchants began to query the prevailing supply-glut narrative, as actions within the Brent and WTI ahead curves stay removed from ranges that may sometimes replicate such an imbalance, changed into a short-covering led rally after Washington introduced sanctions concentrating on Russia’s most important exporters,” he continued.
“The transfer, geared toward chopping Moscow’s warfare funding, disrupted flows that had quietly sustained Russian output regardless of the broader Western embargo,” Hansen mentioned.
Rigzone has contacted the White Home, the Division of Data and Press of the Russian Ministry of Overseas Affairs, Lukoil, and Rosneft for touch upon the JPM report and the analysis notes from HSBC and Saxo. On the time of writing, not one of the above have responded to Rigzone.
In a launch posted on the U.S. Division of the Treasury web site on Wednesday, U.S. Treasury Secretary Scott Bessent introduced that the Treasury “is sanctioning Russia’s two largest oil corporations that fund the Kremlin’s warfare machine”. In that launch, the Treasury famous that “in the present day’s actions improve stress on Russia’s vitality sector and degrade the Kremlin’s skill to boost income for its warfare machine and help its weakened economic system”.
In response to a submit on the official X account of the Ministry of Overseas Affairs of Russia on October 23, Russian President Vladimir Putin mentioned, “sanctions will NOT considerably have an effect on our financial well-being”.
“Russia’s vitality sector stays secure & assured. Our contribution to world vitality steadiness is substantial. Disrupting this steadiness isn’t within the curiosity of the world,” he added.
To contact the creator, e-mail andreas.exarheas@rigzone.com
