Lost Russian oil revenue

Western sanctions against Russia have broadly reduced state oil revenues and diverted tens of billions of dollars to shipping and refining companies, some of which have Russian ties. Most of the winners from the sanctions were created in China, India, Greece, and the United Arab Emirates. Neither firm violates sanctions, but they have taken advantage of measures designed by the European Union and the United States to cut revenues from what they call the Russian president’s war machine.

As the war in Ukraine continues, Russia’s income is falling, but the number of exports has stayed about the same despite the sanctions.

Putin has told the West that the sanctions will lead to a big increase in the price of energy. Instead, the international benchmark price of Brent oil fell to $80 per barrel.

After the Group of Seven (G7) industrialized nations imposed a price cap on Russian oil in December, Moscow’s oil export earnings fell 40.5% year-on-year in January.

The sanctions on Russia – the toughest ever imposed on a single country – include a strict ban on Russian energy purchases by the United States and the European Union and a ban on shipping Russian crude anywhere in the world unless it sells for $60 a barrel.

Russia soon moved most of its crude and refined products to buyers in Asia, China, and India at steep discounts compared to competing products from the Middle East.

Russian oil firms are desperate

Shipping bans and price caps have scared away buyers and forced Russia to pay for the transportation of crude because it does not have enough tankers to export. Russian oil firms have been offering discounts of $15-$20 a barrel to buyers in India and China.

In addition, Russian sellers also paid $15-$21 per barrel to shipping companies to transport crude oil from Russia to China or India.

As a result, Russian companies received only $49.49 per barrel of Urals in January at Russian ports, which is 42.5% less than the previous year and only 63% of the European Brent benchmark price.

U.S. natgas futures slide 2%

U.S. natural gas futures dropped 2.4% Wednesday. That’s because it’s getting warmer and thawing out the oil and gas wells, which is decreasing the amount of natural gas that can be produced. Also, there were fewer LNG exports. And, the weather should be mostly mild for the rest of the February. This is keeping people from using as much heat.

The price drop came despite growing market expectations that Freeport LNG’s export facility in Texas will begin drawing large volumes of gas in the coming weeks to produce LNG for export.