RJ's update on Russia - June 13
Posted: Mon Jun 13, 2022 9:14 am
US RESEARCH PUBLISHED BY RAYMOND JAMES & ASSOCIATES
June 13, 2022
Energy Stat: Russian Oil Industry's Hit from the War is Already Steep — And the EU Embargo Hasn't Even Started Yet
READ MORE: <https://raymondjames.bluematrix.com/sel ... ource=mail>
It feels like much longer, but less than four months have passed since Russia invaded Ukraine, triggering — among the myriad consequences — the world’s worst energy supply shock since at least the Arab Spring in 2011. Drivers everywhere are feeling the pain of triple-digit oil prices, and consumers are taking an additional hit from ultra-expensive natural gas. But, in relative terms, all of this pales in comparison to the economic damage in Russia itself. The Kremlin’s decision-makers evidently had not paid attention to our pre-war analysis… well, now they know. Sanctions against Russia extend far beyond energy, but the nature of the oil industry makes it straightforward to calculate the direct financial impact.
In this report, we will outline our latest thoughts on Russian production along with broader updates to our global oil model assumptions. Additionally, we will quantify the impact to Russia from 1) lower export volumes, over time; and 2) already much weaker realized pricing, the latter tending to get less attention than it deserves. Alas, none of this means that Moscow is about to reconsider its behavior, but the international effort to defund the Russian war machine will likely be more effective than you might think. Following last month’s decision by the European Union to impose an embargo against Russian oil, the defunding effort will receive another boost, particularly if it ends up being bolstered by secondary sanctions. Finally, a sneak preview: we will soon be publishing an analogous update on what’s happening with Russian natural gas in Europe.
June 13, 2022
Energy Stat: Russian Oil Industry's Hit from the War is Already Steep — And the EU Embargo Hasn't Even Started Yet
READ MORE: <https://raymondjames.bluematrix.com/sel ... ource=mail>
It feels like much longer, but less than four months have passed since Russia invaded Ukraine, triggering — among the myriad consequences — the world’s worst energy supply shock since at least the Arab Spring in 2011. Drivers everywhere are feeling the pain of triple-digit oil prices, and consumers are taking an additional hit from ultra-expensive natural gas. But, in relative terms, all of this pales in comparison to the economic damage in Russia itself. The Kremlin’s decision-makers evidently had not paid attention to our pre-war analysis… well, now they know. Sanctions against Russia extend far beyond energy, but the nature of the oil industry makes it straightforward to calculate the direct financial impact.
In this report, we will outline our latest thoughts on Russian production along with broader updates to our global oil model assumptions. Additionally, we will quantify the impact to Russia from 1) lower export volumes, over time; and 2) already much weaker realized pricing, the latter tending to get less attention than it deserves. Alas, none of this means that Moscow is about to reconsider its behavior, but the international effort to defund the Russian war machine will likely be more effective than you might think. Following last month’s decision by the European Union to impose an embargo against Russian oil, the defunding effort will receive another boost, particularly if it ends up being bolstered by secondary sanctions. Finally, a sneak preview: we will soon be publishing an analogous update on what’s happening with Russian natural gas in Europe.