Price cap will bite into Russian oil output in 2023

Significance

Russia has lost almost all its customers in Europe, which bought 48% of its crude exports by volume last year. To compensate, it has been sending more crude to Asian markets in recent months, but this is costly, time-consuming and now complicated by the price cap.

Impacts

• The OPEC+ coalition is likely to maintain tight supply to support oil prices.
• Lower oil revenues will put pressure on Russia's current account and the ruble.
• Oil from the Sakhalin-2 project is exempted from the price cap mechanism; Sakhalin-1 could also be granted an exemption.
• Kazakh oil exports sharing pipeline infrastructure with Russia may face technical and bureaucratic impediments.