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Oil Prices Fall As Druzbha Pipeline Resumes Flows

Oil Prices Fall As Druzbha Pipeline Resumes Flows

Oil prices have been falling…

Goldman Sachs Slashes Oil Price Forecast By $10

Goldman Sachs Slashes Oil Price Forecast By $10

Goldman Sachs has slashed its…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

  • Analysts: Asian buyers are unlikely to be able to absorb all the Russian oil unwanted in the West.
  • There is a distinct possibility of a sharp drop in Russian oil exports.
  • BofA: A sharp contraction in Russian oil exports could push Brent well past $150/bbl.

Brent Crude prices could jump to well above $150 per barrel if Russia’s oil exports fall off a cliff in the coming months, according to Bank of America.

“With our $120/bbl Brent target now in sight, we believe that a sharp contraction in Russian oil exports could .... push Brent well past $150/bbl,” analysts at Bank of America (BofA) Global Research wrote in a research note on Friday carried by Reuters.

In a base-case scenario, Bank of America expects Brent Crude prices to average $104.48 a barrel this year and $100 a barrel in 2023.

Early on Friday, Brent Crude was trading at over $117 per barrel, the highest in two months, amid tight fuel supplies globally and bullish prospects of demand with the U.S. driving season beginning with the Memorial Day holiday weekend and Shanghai in China set for gradual reopening from June 1st.

There is a distinct possibility of a sharp drop in Russian oil exports as the EU continues to seek consensus and persuade Hungary to drop its opposition to a Russian oil embargo. Reports have it that some EU member states are inclined to accept a temporary exemption of Russian pipeline supply to central Europe via the Druzhba pipeline from the embargo as a bargaining chip to convince Hungary to agree to a ban on imports of Russian seaborne oil.

Russia is boosting supply to India and China, but Asian buyers are unlikely to be able to absorb all the Russian oil unwanted in the West, analysts say.

In its latest Oil Market Report this month, the International Energy Agency (IEA) estimated that Russia already shut in nearly 1 million bpd in April.

So far, Russian exports have held up, but as of May 15, the major international trading houses had to halt all transactions with state-controlled Rosneft, Gazprom Neft, and Transneft, the agency noted.

“Following a supply decline of nearly 1 mb/d in April, losses could expand to around 3 mb/d during the second half of the year,” the IEA said, referring to Russia’s oil supply.  

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on May 27 2022 said:
    The combined crude oil imports of China and India amount to more than 17.0 million barrels a day (mbd) compared with 14.6 mbd for the EU. This means that China and India are able to absorb all the Russian oil unwanted in the West.

    Therefore, Even if the EU bans Russian oil, the 5.0 mbd of Russian oil and petroleum products exports to the EU won’t be short of buyers particularly in the Asia-Pacific region.

    However, an EU ban on Russian oil is looking unlikely because of stiff opposition from Hungary. There is a big chance that Hungary will sink it.

    There is no replacement now or for the foreseeable future for 8.0 mbd of Russian oil exports. The alternative is a disastrous global energy crisis with Brent crude hitting $150 or even $200 a barrel.

    Guess who would be the biggest losers: the United States and the EU. The United States imports more than 9.0 mbd so its economy will be the most vulnerable to an oil price shock. As for the EU, its economy will shrink by a few percentage points.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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