Good morning, this is the Oil Patch. We're your daily multivitamin of oil and gas news.

Here's what the Oilman has for you today:

• Russian Roulette: Sanction Survival Tactics

• Ceyhan Rises from the Ashes

• Refining the Future

• Tweet of the Day + Meme of the Day

Russian Roulette: Sanction Survival Tactics

Another day, another note from Goldman Sachs. This time, the investment bank is pointing to a curious trend: the price Russia's trade partners pay for its crude is much higher than the quoted prices. How much higher? Goldman Sachs estimates it could be as much as $25 per barrel. But why does this matter? And does it mean Russia is immune to Western sanctions? Let's dive in.

You may recall

In response to Western sanctions, Russia announced last week that it would be cutting its oil production by 500,000 barrels per day. It's not the first time Russia has faced Western sanctions; in fact, following its invasion of Ukraine nearly a year ago, the price of international Brent crude soared to all-time highs. Since then, Russia's benchmark Urals blend has been trading at deep discounts as European buyers have shunned it.

So, what's going on with the price discrepancy? Well, for one, Russia's State Duma introduced a bill over the weekend setting discounts for Russian oil exports, which typically trade at a discount to dated Brent. But Goldman Sachs argues that the resilience of Russia's oil production may also be due to the fact that the effective price paid for its oil is significantly greater than the quoted price. In other words, Russia's trade partners are paying more than they should be for Russian crude.

The big question

Does this mean that Russia is immune to Western sanctions? Not necessarily. While it's true that reduced production from Russia is a key driver of Goldman Sachs' oil price forecast, the investment bank also notes that it expects prices to rise gradually to $100 a barrel by December. Moreover, the impact of the price discrepancy on Russia's economy remains to be seen. It's possible that the higher effective price paid for Russian oil could help cushion the country from the impact of Western sanctions, but it's also possible that it could simply be smoke and mirrors.

Ultimately, what this all means is that the situation with Russia's oil industry is complex and multifaceted. While the price discrepancy may be helping Russia to weather the storm of Western sanctions, it's far from a magic bullet. In the coming months, it will be interesting to see how the situation evolves and what impact it has on global oil markets.

Ceyhan Rises from the Ashes

The earthquake in Turkey and Syria may have shaken things up, but the oil keeps flowing. The first tanker loaded with Azeri crude oil has set sail from the Turkish port of Ceyhan, proving that even a natural disaster can't stop the oil industry.

Surviving the Shake

On February 6th, a devastating earthquake struck Turkey and Syria, halting operations at the Ceyhan terminals. The Ceyhan oil terminal temporarily suspended operations, but crude oil flows from Iraq resumed just one day later. However, Azeri crude oil shipments were only restored a week after the earthquake, with the tanker Nordlotus departing from Ceyhan on Monday. Another tanker, the Alfa Baltica, is also at the Botas Ceyhan terminal loading Azeri crude.

A Ray of Sunshine in a Dark Market

The return of Azeri crude oil shipments from Ceyhan is a ray of sunshine in a dark market, especially after Russia announced plans to cut 500,000 barrels per day (bpd) of its oil production in March due to Western sanctions and price caps on Russian crude and petroleum products. With Ceyhan being the key export outlet for Azerbaijan's oil, shipping out around 650,000 bpd of Azeri crude, this development brings much-needed relief to concerns about supply in the market.

It just goes to show that even when faced with a natural disaster, the oil industry keeps chugging along, proving its resilience and determination to keep the world moving.

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Refining the Future

The future's looking bright for refineries in the US, according to the latest Short-Term Energy Outlook (STEO) from the US Energy Information Administration (EIA).

Red Light, Green Light

In 2020, the pandemic brought a halt to refinery operations, leading to an all-time low in utilization at 78.8%. But as the world has recovered, so has the industry, with utilization rates reaching 91% in 2022. The EIA predicts that the trend will continue, with utilization expected to average 90.8% in 2023 and 90.3% in 2024.

Fill'Er Up

This positive outlook for refinery utilization will bring good news for the energy industry, especially with petroleum product prices expected to be lower in 2023 compared to the previous year. However, the EIA notes that prices will still remain high compared to pre-pandemic levels, especially during the spring when refineries undergo maintenance. The 3-2-1 crack spread, which measures the difference between input and output prices, has also been on the rise, leading to increased utilization. As always, though, maintenance periods and seasonal demand changes will limit fleet-wide utilization from climbing much higher than 95%.

Around the Digital Patch

🌋 Devon's Cheetah well's producing 3,000/bbls per day.📉 European gas prices fall to lowest level since September 2021.⚡️ EV sales in Germany tank.📈 Oil demand will exceed pre-pandemic levels in 2023.

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