The prices of oil of both main blends – U.S. WTI and ICE’s Brent – have been hovering within rather ample ranges of $74–80/bbl for the former and $78–86/bbl for the latter over the past month. Meanwhile, against the backdrop of the EU embargo and the oil price ceiling, oil exports from Russia, one of the top global oil producers, fell by more than 10% in the first half of December alone, to about 560 thousand tons per day. The Russian oil industry expected imposition of the embargo and redirected EU-bound supplies to Asian markets, while the effect of the oil price cap is not yet so noticeable due to the transition period provided for by the wording of sanctions. Oil production in Russia has not yet experienced a slowdown vis-a-vis the naturally occurring increase of refining. The Russian authorities plan to introduce retaliatory measures to the price ceiling, but their content and effectiveness are still unclear. Experts expect that oil production in Russia will begin to decline from January due to export restrictions.

The de-facto oil embargo imposed by the EU countries started on December 5, along with the price cap on the commodity (set at $60 per barrel). So far, the effect of the ceiling is not so apparent, since during the transition period of 45 days it is possible for Russian oil producers to ship oil disregarding the price cap for transactions completed before December 5.

The Russian authorities also said they are preparing retaliatory actions to the price ceiling, but it is not yet clear what they could be, given that the countries that introduced the ceiling (the G7 states and the EU) have already abandoned Russian oil.

The new restrictions introduced by Western countries have not yet had a strong impact on production. Thus, Russian companies produce about 1.49 million tons per day, which is even slightly higher than in November.

Thus, the Russian Federation has every chance to approach the level of production of 535 million tons by the end of the year, counterintuitively increasing production by 2% compared to 2021. Some trustable sources say, production in Russia due to the price cap and the embargo may decrease in 2023 by 10-25% compared to the results of this year.

As it was mentioned above, the export restrictions are forcing Russian oil companies to increase oil refining. Thus, the utilized capacity of Russian refineries increased on average by 1.5%, up to 794 thousand tons per day. Despite the decline in oil prices, oil companies receive so-called damper (compensatory) payments from the budget for the supply of diesel fuel to the domestic market, while in December the petrol damper will enter the negative zone (minus 5 thousand per ton, according to Petromarket estimates as of December 20).