Sanctions and counter-sanctions, will the $380 oil price appear?

Recently, the leaders of the Group of Seven (G7) reached a consensus to commit to tougher action against Russia, set a cap on Russian oil prices, and cut Russia's oil export earnings
.
For example, if a tanker transports oil from Russia at a price cap above the price cap set by the G7, it will not be able to obtain the insurance and financial services
necessary for such an exchange.

In response, Moscow said any price cap plan would lead to scarcity in the global oil market and soaring prices for European consumers
.
Russian Deputy Prime Minister Alexander Novak said in a televised address last week: "This is another attempt to intervene in market mechanisms that will only lead to market imbalances
.
" ”

JPMorgan Chase & Co.
Analysts warned that if punitive measures in the United States and Europe prompted Russia to retaliate against production cuts, global oil prices could reach a "sky-high price"
of $380 per barrel.

In fact, as early as early June, Biden said that the West was exploring the feasibility of buying Russian oil at below-market prices, rather than abandoning imports
.
In response to the visit, Russian presidential press secretary Peskov said that Russia will not sell energy
at a loss.
Peskov said, "Despite the artificial difficulties caused by sanctions, in any case, everything is regulated by the
market.
" Russia certainly does not sell anything at a loss
.
"

01.
Sky-high oil prices

According to data compiled by Finland's Centre for Research on Energy and Clean Air, Russia's oil, gas and coal exports reached a record 93 billion euros (652.
6 billion yuan)
in the first 100 days from Feb.
24 to June 3.
About 2/3 of that comes from oil, and most of the rest comes from natural gas
.

The agency said Russia's revenue from energy exports could fully cover its spending
in the Russo-Ukrainian war.
Because of this, the United States and the European Union have continuously increased sanctions against Russia to cut off fossil fuel exports
, which are key drivers of Russia's military construction.

It is worth noting that Russia's finances are heavily dependent on energy exports
.
According to the International Energy Agency (IEA), oil and gas revenues contribute 45%
of Russia's budget in 2021.
Therefore, in the face of repeated sanctions by the United States and the European Union on their energy exports, it is inevitable that they will not sit still
.

JPMorgan warned that if the G7 does set a ceiling on Russian oil prices, given Russia's fiscal position, the country has the ability to cut 5 million barrels of crude oil per day without unduly damaging its own economy, which could push cloth oil to $380 (Brent crude is $104 per barrel as of press time
).
Previously, Russian Deputy Prime Minister Novak has warned that if the G7 limits the price of Russian oil, it will only push up the price of crude oil further
.

Analysts wrote that a 3 million barrels reduction in daily supply would push benchmark London crude prices up to $190, while the worst-case scenario would be a 5 million barrels reduction in daily supply, which could mean a "surge" in crude prices to $
380 per barrel.

"The most obvious and most likely risk of the price cap is that Russia may choose not to accept it and retaliate by reducing exports," the analysts wrote
.
"The government is likely to retaliate by cutting production, thus causing suffering
to Western countries.
" The tension in the global oil market is good
for Russia.
”

02.
Sanctions and Anti-Sanctions

At present, the G7 is still officially implemented to set a ceiling on Russian oil prices, but the previous sanctions against Russia have shown that although Russia's production details have declined under sanctions, Russia's oil revenue has increased significantly due to soaring energy prices
.
In April, Russia's oil production (including crude oil, condensate, NGLs) fell by 960,000 b/d month-on-month to 10.
4 million b/d, the lowest
since November 2020, EIA data showed.
But in the first 100 days of the escalation of the Russian-Ukrainian conflict, Rus' oil, gas and coal exports reached a record 93 billion euros
.

It is worth noting that not long ago, the Russian side announced the overhaul of natural gas transmission equipment, reducing the supply of natural gas to Europe by 60%.

A few days later, Russia announced again that the two gas pipelines of Nord Stream-1 would be closed from July 11 to 21 for routine maintenance
.
Russia's move will lead to another 60%
drop in gas exports to Europe in July.
In this regard, some analysts pointed out that this move will exacerbate the recent shortage of
natural gas in the European market.
The rise in natural gas prices will further stimulate the rise in
oil prices.
Behind the sanctions and anti-sanctions, the end result is a soaring oil price!

In response to the "upper oil price ceiling" against Russia, Japanese Prime Minister Fumio Kishida said that he would set the upper limit of Russian oil prices at half
of its current price.
In addition, a mechanism will be established to prohibit the purchase of Russian oil
at higher prices than set.

Russia quickly warned against Japan's remarks: Japan will not get oil or gas from Russia and will not participate in the Sakhalin 2 project
.

Medvedev, vice chairman of the Russian Federal Security Council, said that this (setting a cap on oil prices for Russia) means that "the oil on the market will be greatly reduced, and its price will increase significantly" and "this is higher
than the forecast astronomical price of $300-400.
" Please compare
this sky-high price with the change in natural gas prices.
Japan will not get Russian oil or gas, just as
it will not participate in the Sakhalin 2 LNG project.
”

Just after Russian President Vladimir Putin signed a June 30 decree that Russia would set up a new company to take over the stake in the Sakhalin 2 energy project in the
event of Western sanctions against Russia.
It is worth noting that after Western companies announced their withdrawal from the project, only two Japanese companies were left with foreign shareholders in the
project.
This also means that Japanese companies are out
of the Sakhalin 2' LNG project.
However, almost all of the Russian gas imported by Japan comes from the supply of the
Sakhalin 2 project.
Some Japanese government sources said that the problem
of natural gas imports must be sensed with unprecedented tension.

It can be said that whether it is the previous announcement of the nationalization of the "Sakhalin-2" oil and gas development project in the Far East, or the warning issued by Russia to Japan this time, it is its counter-sanctions against Russia initiated by Western countries
.