Europe has not banned Russian crude oil since the full outbreak of the conflict between Russia and Ukraine. Xiaomo believes that with the change of the situation in Europe, the possibility of an European embargo on Russian crude oil will suddenly increase, and the oil price will soar to $185 per barrel in this case!

For now, Russian crude oil exports are still quite resilient. Russian crude oil shipments reached 7.3 million barrels a day in the seven days to April 16, compared with an average of 7.58 million barrels a day in February, according to JPMorgan. It is worth noting that according to JPMorgan Chase & Co's calculation, Russian crude oil exports are on average 360000 barrels higher than before the conflict, while exports of petroleum products such as fuel oil, naphtha and VGO have fallen by 700000 barrels.

The decline in Russian crude oil exports was mainly due to a 200000 barrel drop in Russian domestic demand for crude oil, which led to the suspension of refineries. However, Russia's refinery cuts rose to 1.3m b / d in April, nearly 0.6m b / d higher than normal maintenance in April.

JPMorgan Chase & Co's forecast is based on the assumption that European buyers will cut their purchases of Russian oil by about 2.5m b / d by the end of the year, and Russia will only be able to find other buyers for 1m b / d of that oil.

What will happen to prices if Europe extends sanctions to all Russian oil?

Natasha Kaneva, a commodities strategist at JPMorgan Chase & Co, deduces various situations in which Europe expands the scope of sanctions to include Rosneft and warns that "any embargo immediately imposed by the European Commission will have a serious impact on the global oil market and risk a complete rise in prices in the short term." "

Specifically, JPMorgan Chase & Co studied three potential scenarios that the EU could use to impose sanctions on Russian oil, from the most aggressive comprehensive embargo on Russian imports to more conservative tax or price caps on Russian oil imports. In any case, in order to avoid extreme price spikes, the market needs time to adjust.

The most radical comprehensive embargo:

In the short term, a comprehensive and immediate embargo on Rosneft may hurt European consumers more than Russian producers. More importantly, a comprehensive and immediate ban could push the price of crude oil to $185a barrel, as more than 4 million barrels of Russian oil supply will be replaced. there is neither room nor time to reship it to other potential alternative buyers.

Although India has tripled Russian oil imports to 2021, the United States continues to warn India not to increase imports further, and India's ability to take on Russian crude oil is in doubt.

Slower implementation of the embargo on Rosneft:

However, if Europe imposed a more slowly embargo on Rosneft, for example, within a few months, it would be similar to the European ban on Russian coal imports. The ban has a four-month reprieve, so prices are unlikely to be much higher than current levels.

In this case, Russia will have more time to adjust the flow of its oil to friendlier buyers, while crude oil supply growth in other oil-producing countries around the world will have plenty of time to fill some of the shortfall.

To set a price cap or tax:

In addition to a full embargo, the EU may have adopted some less drastic alternatives. A non-comprehensive embargo would allow Europe to continue to have access to Russian oil supplies while still putting financial pressure on Moscow. These alternatives include: first, impose a special tax on Russian oil imported from Europe; second, set a price cap on it.

Because Rosneft's operating profit and loss is less than 10 US dollars per barrel. And Russia's energy minister said the country would sell oil to "friendly countries" in "any price range", so Russian producers could still afford to continue to deliver oil to European consumers. even at a 90% tariff or a price ceiling of $20 a barrel.

Either of these two options could provide a politically acceptable middle ground, allowing the EU to express its position while maintaining its Russian energy lifeline. In addition, under the price cap, the EU is considering setting up an escrow account in which oil buyers deposit the difference between the market price and the price ceiling.

In either case, it is clear that Russia will turn to friendlier buyers to export crude oil and petroleum products. Over the past two months, India has stepped up its purchases of Russian oil, while Turkey has continued to increase its purchases of Russian oil.