A top oil analyst explains Europe’s new fuel sanctions on Russia and how that impacts global energy markets
Good morning. I’m Phil Rosen.
My favorite part of this job is getting the opportunity to speak to interesting, smart people — especially when I get to share their insights here in this newsletter.
Do you have suggestions of who I could talk to next? Tweet me or email me ([email protected]).
Today, I’m sharing my conversation with Matt Smith of commodities analytics firm, Kpler.
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Matt Smith is the lead oil analyst at Kpler. This conversation has been lightly edited for length and clarity.
Phil Rosen: This week the EU has new sanctions and a price cap kicking in on Russian oil products, such as diesel. What’s the impact here?
Matt Smith: It seems like they’re going to play out in a very similar way to the December sanctions, in that Russian volumes are not going to drop off materially by any means, but instead be rerouted elsewhere.
And it seems like the price cap is going to be inconsequential as well. What did we see with the LNG side of things? The price cap was set and it was so high that it was irrelevant anyway. From everything we’ve seen, the price caps are a moot point.
If Europe stops importing diesel from Russia, where could those volumes go instead?
MS: One of two things is going to happen. Either the diesel may be consumed in Africa, or we may see a pickup in diesel exports from Africa into EU-27 countries.
How do the new sanctions impact Russia’s status as a world power?
MS: They’re one of the leading producers and leading exporters in the world, so we shouldn’t expect that to change. What will influence this is how long this war goes on, and how detrimental that is to its energy industry.
It seems to me that the longer the war goes on and the lower their revenues, the more they will likely have to cut back on investment in production. But it’s very, very difficult to predict what’s going to happen, given how nothing has really changed, at least from a production and export perspective over the last year.
Here are the full insights from my conversation with Kpler’s Matt Smith.
What do you think of Smith’s insights? Tweet me @philrosenn, or email me [email protected].
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Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email [email protected]
Edited by Max Adams (@maxradams) in New York.
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