The comprehensive sanctions imposed by the US on Russia’s oil industry are unlikely to deal a major blow to production as high freight rates and the country’s cheap crude oil favour trade, according to Goldman Sachs.
Analysts, including Callum Bruce, wrote in a note dated 24 January that higher rates are encouraging non-sanctioned vessels to carry Russian crude, filling the gap left by blacklisted tankers.
The deepening discount of ESPO oil is also creating strong incentives for price-sensitive traders and refiners to continue buying. After the sanctions, the price of shipping Russian ESPO oil has increased fivefold. According to Goldman, Russia’s oil revenues have increased modestly since the Joe Biden administration imposed sanctions earlier this month, and Western policymakers are expected to prioritise maximising discounts rather than reducing volumes.
Analysts wrote in the note that uncertainty about the impact of sanctions is nevertheless ‘high, especially since some liquidation transactions are permitted until 12 March’.
