Sinolink: The US continues to sanction the Russian energy industry, the dynamic balance of crude oil supply.

Sinolink's research report stated that the changes in the oil industry supply pattern caused by international political factors are expected to reach a sustained period of dynamic balance, and short-term oil price fluctuations are unlikely to bring structural changes to the oil industry. It is recommended to continue to focus on oil investment targets with strong fundamentals and international competitiveness. Event: On January 10 local time in the US, President Biden announced a new round of sanctions on the Russian economy, involving the country's two largest oil companies and 183 oil tankers. These sanctions are the most severe measures taken against the Russian energy sector to date, aimed at cutting off Russia's main source of funding for the Russia-Ukraine conflict. The new measures also include sanctions on multiple energy-related entities and restrictions on Russia's ability to earn US dollars through energy exports. In addition, the US announced sanctions on the Serbian oil company NIS, citing its links to two Russian oil and natural gas companies. Sinolink's main points are as follows: The sanctions have brought about a dynamic change in the international oil supply pattern, with the new round of sanctions mainly affecting Russia's maritime oil exports. Since the Russia-Ukraine conflict in April 2022, the US has imposed comprehensive sanctions on Russia, including the country's energy sector. This round of sanctions primarily targets the inflow of external funds into Russian oil companies and restricts the export of oil products. Rosneft, as Russia's largest and the world's second-largest oil and gas company, accounts for about 6% of global oil and gas output. Looking back at the first round of sanctions in 2022 based on the company's data, from 2021 to 2023, the company's oil and gas production increased from 5 million barrels per day to 5.5 million barrels per day, and net profit increased from 1.012 trillion rubles to 1.529 trillion rubles. From the company's data, the effects of the first round of sanctions on Russia's restrictions on oil exports are not significant, possibly due to changes in Russia's export structure. In 2020, the company's main export areas and methods were China-pipeline (35%), Central and Western Europe-pipeline (15%), Belarus-pipeline (5%), Primorsk port (9%), Kozmino port (9%), Ust-Luga port (7%), etc. At the beginning of the 2022 sanctions, exports to Central and Western Europe were restricted, and this part of oil and gas exports mainly flowed to the Indian and Chinese markets. The shortage of crude oil in the European market resulted in a rise in oil prices for about 7 months. Against the backdrop of increased production in the Middle East and the US, oil prices gradually returned to pre-war levels. The new round of US sanctions mainly targets Russian oil and gas companies' oil tankers, which will have a greater impact on Russia's international oil exports through several major ports. Referring to Rosneft's data, the proportion of pipeline exports exceeded 55% in 2020, this proportion has decreased after the Western Europe pipeline was blocked, and it is expected that the proportion of exports achieved through ports will exceed 60%. The marginal increase in international oil prices will shorten the time needed for dynamic balance in the supply pattern Before the completion of the new Russian oil pipeline construction, port transport has become a major way for Russian oil exports. If the US's sanction policies can be implemented, US sanctions on Russia will certainly have a significant impact on the structure of maritime oil exports, and Russian oil tankers will not be able to pass through certain sea lanes. The supply of oil in some restricted areas may become tight in the short term, leading to a rebound in oil prices, and there will be a driving force for marginal price increases. Unlike pipeline transport, maritime oil tanker transport is more flexible and has greater ability to adapt to dynamic changes. The current round of oil price increases will be smaller than the increase in 2022, and the duration of the cycle will be shorter. In addition, with the OPEC's existing production agreement, global oil supply will quickly reach a dynamic balance, and there is a possibility that oil prices will continue to decline in the future. Risk warning: Rapid changes in international politics, escalation of geopolitical conflicts, and changes in the supply and demand pattern of oil.