Oil prices corrected on Monday amid a worrisome agenda at the Davos economic forum, where most economists surveyed expect a global recession this year. Market participants were also rattled by a jump in Russian seaborne exports, which last week hit their highest since April 2022.

Brent futures corrected after three days of growth. In the absence of drivers, quotes may continue to decline, although on the medium-term distance there are still chances for further recovery. The target of the current upward wave may be the area of $89 per barrel.

THREAT OF GLOBAL RECESSION

The International Economic Forum started in Davos on Monday. Such events often act as an indicator of sentiment. According to the course of the discussion and reports of the participants, it is possible to assess what worries the markets. Two-thirds of economists and heads of large companies surveyed expect economic activity to decline this year. Some 18% see a global recession as “extremely likely.”

This assessment is not unexpected, but, once again appearing in media headlines, forms a negative sentiment in the markets. A recession in the economy means suppressed demand for fuel, which could be a factor in favor of lower oil prices.

RUSSIAN EXPORTS FULLY RECOVERED?

According to data compiled by Bloomberg, seaborne exports from Russia jumped by almost 1 million bpd to 3.8 million bpd. This is the highest level since April 2022. The 4-week average is back above 3mn b/s – normal levels for fall 2022. Formally, the level of Russian exports has fully recovered after the embargo and price ceiling came into effect.

The main contribution to the recovery was made by shipments from Baltic ports. They accounted for 1.7 mln bpd. Bloomberg specifies that the growth of supplies was partly due to the reduction of exports through the northern branch of the Druzhba pipeline. In 2022, the pipeline exported 177,000 bpd to Poland and 300,000 bpd to Germany.

The number of vessels without final destination continues to grow rapidly in the structure of shipments. On average, such vessels accounted for a third of all seaborne exports or 1.05 mln b/s in 4 weeks. Most of these vessels are likely to unload in India. China accounts for another 1 million b/s, with 0.77 million b/s being shipped to India officially.

Export data looks very strong, but so far this is coming at the expense of price. The Russian Ministry of Finance reported that the average Urals crude oil price averaged $46.82 per barrel from December 15 to January 14. The discount to Brent is more than 40%. This puts a lot of pressure on industry margins and Russian budget revenues.

The Urals discount creates a kind of buffer that can mitigate the impact of a possible reduction in Russian production on the Brent price. In the event of a cut, the discount may narrow first, and after it goes to a fairer $15-20 per barrel, upward pressure on the global benchmark will begin.

OPEC will present an updated forecast on the oil market today.