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Russia’s Crude Exports Expand As Global Energy Crisis Deepens
The global economy’s divestment from Russia has disrupted more than 10% of global oil flows—but the energy superpower continues to export the commodity to unbegrudging buyers.
Russia's attack on Ukraine has spurred unprecedented sanctions from Western economies and their allies that continue to upset global commodity markets, most notably by restricting Russian oil supply that accounts for nearly 13% of total oil exports, according to S&P Global Commodity Insights. However, Russian seaborne crude exports remained at three-year post-pandemic highs in the first half of June as China and India gulp up the former Soviet superpower’s petroleum. Russian Deputy Prime Minister Alexander Novak announced today that the country’s oil exports grew 12% in the first five months of 2022.
"The U.S. has already banned imports of Russian crudes, and with the European Union in the process of doing so, that has left Asia as the only major outlet for those crudes," Lim Jit Yang, adviser for oil markets at Platts Analytics of S&P Global Commodity Insights, said. “As a result, Asian buyers should have the upper hand in terms of pricing.”
The evolving market dynamics come as the outlook for oil supply grows more worrisome. The International Energy Agency warned this week that global oil supply could struggle to match demand in 2023 due to Russia’s constraints, OPEC+’s production buffers, and China’s needs following its COVID lockdowns. The OPEC producer coalition said this week that crude demand is likely to rise while Russia’s production will fall by year-end.
Market participants expect that Russia’s oil exports will expand, and the country will be able to circumvent sanctions imposed by the EU prohibiting eurozone operators from insuring and financing the seaborne transport of Russian oil to third countries by turning to providers in other regions eager to step in. Other market participants believe that alternative approaches to energy sanctions on Russia could punish the aggressor for its invasion of Ukraine while also stabilizing the global oil market.
“There are always ways for cheap crudes to come in, especially when they remain competitive even after taking into account freight and insurance," a crude trader with a Chinese state-owned oil company told S&P Global Commodity Insights, explain China and India are likely to take more Russian crudes, while Europe could import more Middle Eastern barrels.
Today is Friday, June 17, 2022, and here is today’s essential intelligence.
Written by Molly Mintz.
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