The center of gravity of crude oil prices has shifted upward

Benefiting from the EU's resolution on Russian oil export sanctions reached at the beginning of this month, coupled with the northern hemisphere ushering in the summer oil season, under the background of the global crude oil supply and demand structure is still good, crude oil futures prices at home and abroad have shown an oscillating upward trend
recently.
Among them, U.
S.
WTI crude oil futures steadily recovered to near the first line of $120 / barrel, while Brent crude oil futures prices also moved higher and stood steady at $120 / barrel
.
At the same time
, the main domestic crude oil futures 2207 contract climbed above the 750 yuan / barrel line.

New EU sanctions came into effect, and Russian oil exports faced losses

Earlier this month, the European Commission announced that the sixth round of sanctions against Russia came into effect, including a partial oil embargo
.
There are two core points of the sanctions: First, EU member states are prohibited from purchasing Russian seaborne crude oil and refined products
.
It is planned to stop buying Russian seaborne crude oil in the next 6 months and Russian oil products within 8 months, and by the end of 2022, the EU's oil imports from Russia will be reduced by 90%.

Second, in order to win sanctions against Russia together with some landlocked EU countries, the embargo
on pipeline Russian oil is temporarily exempted.
According to statistics, in 2021, Russian crude oil and refined products were exported to the EU by 2.
2 million b/d and 1.
2 million b/d
, respectively.
Two-thirds of crude oil exports to the EU are transported by sea (1.
5 million b/d) and one-third by pipeline (700,000 b/d).

In other words, seaborne crude and refined products exports within the scope of EU sanctions against Russia totaled 2.
7 million b/d, accounting for about 25% of
Russian production.
According to estimates by the International Energy Agency, Russia is at risk of closing more oil wells due to new EU sanctions, and it is expected that 1.
2 million to 1.
5 million barrels per day of Russian oil exports will be blocked
.

Seeing the tricks, Rosneft will seek to break the game

Although the new EU sanctions will ban Russian oil from December 5, 2022, and Russian refined oil products from February 5, 2023, for Russia, there are 6-8 months to move around, respond and break the situation
.
Russia can digest embargoed crude oil
by means of export transfers.
At present, the best target for export transfer is Asian countries, such as India and China, which are major
crude oil consumers.
Taking India as an example, since March this year, India's imports of Russian oil have grown
explosively.
According to statistics, from March to May 2022, India's imports of Russian oil reached 100,000 b/d, 250,000 b/d and 800,000 b/d
respectively.
Russia has overtaken Saudi Arabia and the UAE to become India's second-largest source of imports, after Iraq
.

The author believes that there are two factors driving India's imports of Russian oil: First, Russian oil is sold
at a large discount.
Data show that from April to May 2022, the average export price of Russian Ural crude oil was 73.
24 US dollars / barrel, which was 39% lower than the international oil price, which was very competitive
.
Second, the current oil cracking price difference is huge, stimulating Indian refineries to import Russian oil on a large scale to earn income
.
According to statistics, in April 2022, the crude oil processing volume of Indian refineries reached 21.
58 million tons, an increase of 8.
5% year-on-year, close to the historical high level
in 2018.
During the same period, the country's diesel and gasoline exports reached 2.
69 million tons and 1.
4 million tons respectively, a year-on-year increase of 43% and 50%.

Under this trend, India will continue to expand the scale of
Russian oil imports in the future.

In addition, export diversion will weaken the negative impact
of new EU sanctions.
Through the means of crossing the sea in secret, other crude oil is mixed with Russian Ural crude oil to form a blended oil and re-imported into the EU to avoid new sanctions
.
Based on the above considerations, the author believes that the damage to Russian crude oil production is expected to be weaker than the International Energy Agency's estimates, and the loss of Russian oil production this year may be 300,000-500,000 barrels / day
.

OPEC production increase is limited, and the peak crude oil consumption season is coming

At their 29th ministerial meeting, OPEC producers decided to raise their monthly output from July to August to 648,000 barrels per day, up from the previous monthly increase plan
of 432,000 barrels per day.
Although the decision of oil producers to accelerate production increases is unexpected, there are not many spare capacity remaining in OPEC members at present, and the scale of production increases in recent months has not reached the target, and the market's concern about tight supply is still unabated
.
With the arrival of the peak crude oil consumption season in the northern hemisphere, the low inventory phenomenon in the oil market will continue
.

On the whole, the lack of EU oil export embargo sanctions will bring losses to the supply side, but the overall impact is limited, and OPEC's production increase is doubtful, coupled with the arrival of the peak season of oil market demand, it is expected that crude oil will still maintain a strong oscillation pattern
.