Q1 2023: Screws tighten on Russia

I. Market Summary

The quarter opened with optimism around China’s sudden abandonment of zero‑COVID and closed amid a global banking wobble that wiped 13 % off Brent in a week. Meanwhile, the EU’s refined‑product embargo tightened the screws on Russia, and Washington green‑lit the controversial Willow Arctic oil project.

II. Demand rebound vs. macro‑risk

The IEA projected global oil demand would reach a record 102.3 mb/d in 2023, with China accounting for half the growth as mobility roared back after January’s reopening. Yet by mid‑March, fears triggered by Silicon Valley Bank’s collapse spurred the steepest weekly price fall since April 2020. Brent settled at US $72.97 / bbl on 17 March.

III. Sanctions tighten further

On 5 February the EU and G7 implemented a two‑tier price cap on Russian diesel (US $100 / bbl) and fuel oil (US $45 / bbl) alongside a complete import ban. Initial trade data showed Russian clean‑product exports rerouting to Turkey and the Middle East, lengthening voyage times and boosting tanker demand.

IV. U.S. policy spotlight—Willow Project

The Biden administration approved ConocoPhillips’ 180 kb/d Willow development in Alaska’s National Petroleum Reserve on 13 March. Environmental groups labelled it a “carbon bomb,” but the decision underscored the administration’s balancing act between energy security and climate pledges.

V. Market balances & refining

European middle‑distillate cracks eased from December highs as mild weather cut heating oil pull, but tightness persisted in Atlantic basin diesel. Asian gasoline margins climbed on resurgent Chinese mobility.

V. Take‑aways for operators

Macro‑financial risk can overwhelm fundamentals—liquidity management and stress‑testing remain critical.

The refined‑product cap is more complex operationally than the crude cap; compliance teams need product‑specific monitoring tools.