Oil prices are nearing $100 a barrel, throwing a spanner into the US Federal Reserve’s fight against inflation — but at least one party would be rejoicing: Russia.
Oil prices have gained recently on the back of supply cuts from major energy producers Saudi Arabia and Russia.
The production cuts have sent oil prices up over 10% so far this year and are likely benefiting Russia and its war chest, according to a Financial Times analysis of shipping and insurance records, the outlet reported on Sunday.
The FT’s analysis showed that almost three-quarters of all seaborne Russian crude oil exported out of the country managed to get shipped without Western insurance in August. That’s up from about 50% in the Spring, the FT reported, citing data from data firm Kpler and insurance companies.
Russia’s side-stepping the use of Western insurance for its oil exports is an important development because it’s one of the key tools used to enforce a G7-led $60-a-barrel price cap on Russian oil. The price cap is part of sweeping sanctions against Russia over its invasion of Ukraine.
Russia’s ability to ship so much crude without Western insurance suggests it may now be able to sell crude over the price cap, per the FT analysis.
And higher oil prices have boosted Russia’s energy export revenues. The Kremlin raised $17.1 billion from its crude exports in August — up from $15.3 billion in July, data from the International Energy Agency showed.
In fact, Russia could have made over one billion dollars just by hiking its oil shipping costs — even though it was still selling crude to India below the $60-a-barrel price cap, according to a separate FT analysis in August.
Despite sweeping sanctions, Russia’s wartime economy is getting a boost from defense and government spending, the New York Times reported in July.
Higher oil prices are bad news for the world’s central banks, which have been trying to tame high inflation since last year. Energy is a key input for economic activities, so higher oil prices generally lead to inflation.
US West Texas Intermediate and Brent crude oil futures were up 0.1% at $90.13 a barrel and $93.38 a barrel, respectively, at 11.34 p.m. ET on Sunday.
Russia’s energy ministry and Kpler did not immediately respond to requests from Insider for comment sent outside regular business hours.