The EU embargo on Russian oil is imminent, and oil prices will not soar

According to the sixth round of EU sanctions against Russia adopted in June, the EU will officially stop importing Russian crude oil from December 5 and Russian oil products
from February 5, 2023.
Some analysts believe that once the EU completely stops importing Russian oil, international oil prices will soar, even to $
200 per barrel.
But the author believes that the Russian oil embargo will not cause oil prices to soar
.

It should be noted that the EU's embargo on Russian oil is really implemented, which has a great impact
on the international oil market and the Russian oil industry.
For the international oil market, the embargo itself amounts to an additional production
cut.
Previously, major oil producers have joined forces to limit production and keep New York crude futures at $
90 a barrel.
On this basis, if production cuts continue, crude oil futures prices will certainly be positively affected
.
As for the Russian oil industry, the International Energy Agency has predicted that the average daily production of Russian oil is likely to fall below
10 million barrels.
At the end of March next year, Russia's oil production will be nearly 2 million barrels per day less than before the Russian-Ukrainian conflict, and is expected to be about 9.
6 million barrels
.
In addition, the shipment of Russian oil will also be affected
by Europe's refusal to provide insurance services.
This is a heavy blow
to Russia, which relies heavily on oil revenues.

However, it would certainly be an overreaction
to think that a 2 million b/d reduction in crude oil production in the market would cause crude oil prices to double from current levels.
At present, the G7 except Japan have implemented import bans on Russian crude oil, of which France, Germany, and Italy are EU members, and international oil prices have obviously not soared
.
Even if the ban is extended to petroleum products, its impact
on the international oil market should not be overestimated.
According to the assessment of major energy analysts, non-OPEC supply in the first quarter of 2023 decreased by about 900,000 b/d on average compared with the fourth quarter of 2022, which can also be regarded as the current market's baseline expectation
for Russian oil reduction.
As mentioned earlier, the expectations of various institutions for Russian oil production cuts are 2 million barrels per day, which shows that institutions believe that other non-OPEC oil producers can make up
for the Russian oil cuts.

In addition, due to the economic slowdown, institutions are also constantly looking down on daily demand
for crude oil in 2023.
Just in November, the U.
S.
Energy Information Administration cut its 2023 crude oil demand forecast by another 320,000 barrels, and OPEC lowered its crude oil demand forecast for next year by another 100,000 barrels
.
In 2023, the international crude oil market is likely to see a double decline in supply and demand, reflected in international oil prices, and its changes may not be as drastic
as some analysts imagine.