Russia stopped giving foreigners discounts on energy resources

Domestic oil and gas companies are gradually getting rid of their pariah status in the global energy market. Russian raw materials, which recently foreign consumers agreed to buy only at significant discounts, are beginning to be traded at the market price. Moreover, Sakhalin liquefied gas finds demand even with a premium to stock quotes.

It’s too early to relax, though. The recently observed increased demand for energy resources from our country may again encounter high competition with hydrocarbons from producing countries that are not burdened by Western sanctions.

The operator of the Sakhalin-2 project has sold three large consignments of liquefied gas to foreign buyers at current market prices. For one more batch of hydrocarbons, the importers agreed to pay a premium to the supplier, if only the fuel was delivered on time – no later than December of this year. The deals concluded by Sakhalin Energy can be considered a breakthrough, since back in September, before the start of the heating season, raw materials produced under the project were shipped at a big discount to the average wholesale prices in the Asian region.

However, until recently, Russia was forced to sell abroad with significant dumping not only Far Eastern LNG, but also the lion’s share of all exported energy resources. International traders preferred to refuse deals with domestic suppliers for fear of falling under the prescribed sanctions against buyers of Russian hydrocarbons. In particular, Chinese and Indian customers, to whom our government is now betting on an increase in shipments, have been receiving fuel at a 15-30% discount for more than six months.

With current prices of $95-100 per barrel and $1100-1150 per thousand cubic meters, Russia is able to afford to give up part of the profits, just to build on the surplus of produced products. Under such conditions, only the lazy will not acquire cubic meters and barrels.

However, now, when the prices of our producers are returning to market values, we will again have to prove the demand for our own goods by all possible means. To the questions whether it is possible to expect that importers of Russian hydrocarbons, not only LNG, but also all other types of fuel, will stop being afraid of sanctions and start negotiating deals on market terms, and when we will be able to sell hydrocarbons, focusing on geopolitical factors to a minimum extent, they answered experts.

Artem Tuzov, Executive Director of the Capital Market Department, IVA Partners Investment Company: “A discount for a new buyer for a short period can be justified by commercial purposes or, as in the case of the transition of foreign refineries to Russian oil, by the buyer’s high costs for reconfiguring processing capacities.

Long-term discounts on all goods exported from Russia will gradually decrease or disappear altogether, and our selling prices will be equal to world prices. This is how the export market of the entire planet works.

Fairly high competition exists both among sellers and buyers of hydrocarbons. This is how the total market price for the exported product is formed. In turn, the discount to individual buyers introduces an imbalance and, as a result, is not beneficial for both sellers and consumers.”

Valentina Milashevskaya, specialist in commodity markets of the Finmir marketplace: “In the coming months, we can not expect the introduction of new significant sanctions restrictions from Europe and the United States. Or the claims will be weak.

There is no mystery here – the inhabitants of Western countries have already lost their former interest in the issues of restrictions against the Russian economy and the Europeans are much more interested in the need to maintain a comfortable temperature for life this winter, as well as the issues of rising tariffs for electricity, fuel and food.

If the West continues to try to “saddle” the anti-Russian theme without solving its internal problems, then political transformations may follow. Examples are the victory of nationally oriented parties in elections in Italy, Hungary, as well as the transition of the lower house of Congress (and maybe the Senate) under the control of the Republicans in the United States.

Therefore, the introduction of new sanctions against energy carriers from Russia should not be expected yet. Companies that work with the Russian market, exporting or importing all kinds of goods, are likely to either receive general licenses to operate and open accounts in our country, or they will simply “turn a blind eye” to their work.

Talk of capping oil and gas prices turned out to be nothing more than ordinary statements aimed at gaining “political points”, but rather quickly stopped after Russia’s threat to cut off energy supplies. Demand is projected to be strong from the global industry, which will begin to recover in the coming quarters from logistical difficulties, inflationary pressures and other cataclysms.

Of course, we should not forget about the introduction from December 5 of a ban on the supply of oil from Russia, and later our oil products by sea. However, it can be expected that buyers will still strive to maintain supplies from our country. Even with the help of various tricks, including deliveries through third countries.”

Vladimir Chernov, analyst at Freedom Finance Global: “Much will depend on the measures taken by the US and the EU. In the seventh package of restrictions, the European Union lifted sanctions against third countries on the transportation of Russian oil, and in the eighth package of anti-Russian measures, Brussels again introduced restrictions if Russian raw materials are purchased at a higher price than the ceiling.

I don’t think that Asian countries have ceased to be afraid of sanctions, it’s just that now the conditions for their introduction are ambiguous and this can be used. Minimally focusing on geopolitical factors, Russia will be able to sell hydrocarbons only after all geopolitical tension subsides and all restrictions on the trade in Russian energy resources, their freight, logistics insurance, and the like are lifted. You will most likely have to wait a very long time. However, the EU will be able to start calmly buying Russian gas again through a new hub in Turkey, the construction of which has already been agreed and will begin soon.”