May 12, 2022
The Ukraine war is going on with full force so it is difficult to predict whether Russia or Ukraine, the two direct warring parties, eventually could be declared as winner. No matter who wins, the collective casualty and economic loss would be catastrophic.
EU, under the leadership of US, has taken a hardline against Russia and called for sanctions after sanctions. Unfortunately, when energy is the issue, the following news reports make it clear that Putin is wining the sanction game. IEA, an OECD backed organization, declared, in fact, that EU is losing badly: EU is paying Russia US$20 billion/month, Russian oil export revenue has increased by 50%! It should be noted that EU is paying for Russian oil at a premium. We have to wonder why EU joined the war, along with providing Ukraine with billion dollars military equipment and humanity aid, they are paying Russia higher crude oil prices, everyday! Further, EU is struggling to come up with a new sanction scheme that would allow EU be independent of Russian energy within three~five years with an investment of US$205 billion. It appears from the data that EU is paying US$20 billion per month for crude oil alone, then one year from now, EU would have to cover US$240 billion already. But, EU is still on the hook for Russian gas!
Then the headline of the last report “China is spoilt for choice of oil as many avoid Russian barrels,” is simply absurd.
First of all: EU keeps the same crude oil import volume from Russia, war or not, so who is “as many” avoid Russian barrels? Of course, EU has to import Russian crude because it does not have a choice!
Second, India, as well as China, is making the best bet for her people, importing energy with the lowest price. Why the price of Russian crude is low? Simple, US and EU sanctioned Russian energy so Russia has to find market offer competitive prices.
Third, it is absolutely senseless for US+EU condemning India and China for importing cheap Russian crude oil, while EU is paying the premium for Russian crude oil every day but insisting on it is a sanction.
Fourth, US is plagued by high energy cost that leads to record high inflation. President Biden announced on May 10th that he will focus on lowering inflation. But today, Biden team announced the cancellation of Alaskan oil exploration lease. This is very discouraging for US domestic oil and gas producers. US policy on oil and gas is contradictory and counterproductive!
Russia is earning $20 billion per month in oil sales as higher crude prices lift export revenue 50%, says IEA
Thu, May 12, 2022, 9:46 AM
- Russia’s oil export revenue has soared 50% this year, the International Energy Agency said.
- The Kremlin is earning close to $20 billion per month in 2022.
- Asia has boosted Russian crude purchases as global powers condemn the Kremlin’s invasion of Ukraine.
Russian oil export revenue is up 50% since the start of 2022 with the Kremlin generating close to $20 billion per month in sales, according to the International Energy Agency.
Export volume has rebounded to levels seen before Russia invaded Ukraine, which triggered a wave of international sanctions and a spike in crude prices that’s helped oil revenue.
In April, Russian oil exports climbed by 620,000 barrels per day from the prior month to 8.1 million, back to their January and February average, the IEA said. Increased demand from India and China offset declines from the US and Europe.
Western sanctions also have yet to fully deter global customers from buying Russian oil. While the European Union has publicly condemned the Kremlin for its war in Ukraine, it has yet to impose an oil embargo and remains Russia’s top export market. Still, Russia’s oil exports to the EU have fallen by 535,000 bpd this year, IEA said.
The EU is still nearing a full-scale embargo of Russian crude, while major companies like Shell leave the country over its invasion of Ukraine.
But countries like Austria and Hungary cautioned that a full pivot away from Russia’s energy hold on Europe is easier said than done, and could perhaps take years.
Russia oil revenue up 50% despite sanctions, IEA says
Thu, May 12, 2022, 4:34 AM
Russia’s oil revenues withstood a boycott from global companies and most countries following its invasion of Ukraine, the International Energy Agency (IEA) said on Thursday.
The Pairs-based agency said the Kremlin earned around $20bn (£16.4bn) each month in 2022 from combined sales of crude and products amounting to about 8 million barrels a day (bpd). Total oil export revenues were up 50% this year.
Moscow’s exports rebounded last month by 620,000 bpd from March to 8.1 million bpd back to their January and February average as India and China picked up supply rerouted away from the US and Europe.
However, despite working on a Russia crude import ban, the EU remained the top market for oil exports in April, according to the IEA’s monthly market report.
Volumes decreased 535,000 bpd from the start of the year, and the bloc now accounts for 43% of Russian crude exports, down from around 50% previously.
The agency also signalled a U-turn on its previous forecast in March which it warned 3 million bpd could go offline from April, lowering the figure as supplies fell by 1 million bpd last month.
It estimates these losses could triple in the second half of 2022, and expects the number to rise to 1.6 million bpd in May, 2 million in June and nearly 3 million from July onwards if sanctions expand or deter further buying.
“If agreed, the new embargoes would accelerate the reorientation of trade flows that is already underway and will force Russian oil companies to shut in more wells,” the IEA said.
The IEA, which advises major economies, kept its outlook for world crude markets largely unchanged.
Global fuel markets are tight and could face more strain in the coming months as demand in China rebounds amid new coronavirus lockdowns, suggesting that a production boost elsewhere and slower Chinese demand growth will stave off a big demand deficit.
“Over time, steadily rising volumes from Middle East OPEC+ and the US along with a slowdown in demand growth is expected to fend off an acute supply deficit amid a worsening Russian supply disruption,” it said.
It warned that “soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023” as measures aimed at containing the coronavirus in China were driving an extended economic slowdown in the country.
It comes as EU sanctions against Russian state-linked enterprises like oil giant Rosneft (ROSN.ME) are poised to take effect from 15 May and ahead of a proposed full EU ban on the country’s supplies.
Russian shipments continued to flow despite several energy firms, including BP (BP.L), Shell (SHEL.L) and Norway’s Equinor (EQNR.OL) vowing to stop purchases as they exited the market amid the fallout from the Ukraine war.
Last week, the European Commission proposed a phased embargo on Russian oil imports and products.
On Tuesday, EC president Ursula von der Leyen said the bloc had made some progress in talks over its proposed ban on Russian crude imports, but warned further work was needed.
The bloc is poised to drop a proposed ban on ships carrying Russian crude following objections from member states including Greece.
It is also planning to give Hungary, Slovakia and the Czech Republic more time to comply with sanctions on imports as the plan needs an unanimous vote by EU member states this week to pass.
In U-turn, IEA sees world weathering lost Russian oil supply
Thu, May 12, 2022, 1:27 AM
LONDON (Reuters) -The world will not be left short of oil even with lower output from sanctions-hit Russia, the International Energy Agency (IEA) said on Thursday, in a U-turn after it predicted a possible “global supply shock” in March.
The IEA, after warning on March 16 that 3 million barrels per day (bpd) could be shut in from April, lowered that figure for a second time as it noted only 1 million bpd had gone offline.
Production ramping up elsewhere and slower demand growth due to China’s lockdowns will forestall a big deficit, the Paris-based IEA said.
“Over time, steadily rising volumes from Middle East OPEC+ and the U.S. along with a slowdown in demand growth is expected to fend off an acute supply deficit amid a worsening Russian supply disruption,” the IEA said in its monthly oil report.
The assessment by the Paris-based agency suggests the economic impact from further sanctions on Russian energy mulled by the European Union could be limited.
“Soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023,” the IEA said, adding that curbs aimed at containing COVID-19 in China were driving an extended economic slowdown there.
Reflecting slower products exports and falling domestic demand, around a million barrels per day (bpd) of Russian oil was shut in last month – about half a million bpd less than the agency forecast last month.
The IEA sees that figure rising to 1.6 million bpd in May, to 2 million in June and to nearly 3 million from July onwards if sanctions deter further buying or expand.
The United States and fellow IEA members pledged to release 240 million barrels of oil in their second tapping of emergency stores this year after the IEA sat out a U.S.-led release in November because it saw no major supply disruption at the time.
Russian exports rebounded in April by 620,000 bpd from the month before to 8.1 million bpd, the IEA said, back to their January-February average as supply was rerouted away from the United States and Europe, primarily to India.
As it works on a ban on Russian oil, the European Union remained the top market for Russian oil exports last month, the IEA said, down just 535,000 bpd from the start of the year.
The bloc now accounts for 43% of Russian oil exports, down from around 50% then.
China is spoilt for choice of oil as many avoid Russian barrels
May 12, 2022 by Bloomberg
(Bloomberg) — Chinese oil buyers are spoilt for choice right now even as lockdowns hurt demand as they can opt for everything from discounted Russian crude and sanctioned Iranian oil to regularly-taken Middle Eastern barrels.
While a wave of sweeping anti-virus curbs has put a dent in current consumption, China has an ample list of supplies that refiners can tap once usage rebounds. With Russian cargoes — from ESPO from the Far East and Urals from western fields — being avoided by many other buyers given the war in Ukraine, that’s cleared the way for mainland takers. At the same time, millions of Iranian and Venezuelan barrels are still floating in Chinese waters.
The complex picture shows that China has emerged as one of the beneficiaries of the conflict in Europe, which sparked a surge in crude prices to the highest since 2008 followed by a period of volatility. Beijing has stood by Moscow since the invasion, effectively clearing the way for refiners in the world’s largest oil importer to discreetly take Russian barrels that are being shunned by the US and UK. In addition, the European Union is working toward its own ban.
At least one major Chinese refiner has taken less term supply from Saudi Aramco for cargoes to be shipped in June, according to traders who asked not to be identified. That contrasts with some other North Asian refiners that asked for additional supply from the Saudis, with Middle Eastern barrels relatively cheaper than comparable long-haul cargoes from the U.S. and North Sea.
Chinese oil consumption remains at the center of attention as the renewed lockdowns, including in Shanghai, raise questions over how much demand will drop and for how long. In May, Chinese state refiners are planning to process 4% less than in April, according to industry consultant OilChem.
“The Covid situation is feeding into an increased level of uncertainty surrounding oil demand and the outlook for Chinese refinery runs,” said Jane Xie, a senior oil analyst at data and analytics firm Kpler. “The prospect of an EU ban on Russian oil will inevitably turn some attention onto China, whether they can pick up more barrels once their demand woes are over.”
About 17 million to 20 million barrels of crude, mostly Iranian and Venezuelan, are floating off China, according to shipping analytics firms Vortexa and Kpler. While that’s down from 20 million to 30 million barrels last month, these cargoes have faced facing difficulty finding buyers since February on sluggish demand from private processors, Li said.
Traders said Venezuelan crude was being offered at record discounts with flexible yuan-payment terms, while cargoes of Russia’s Urals were also being shown at steeper discounts of $8 a barrel or more to Brent on a delivered basis to China. In the latest reported deal late last month, a Chinese processor in Shandong bought Urals at a discount of $6.30 to $6.50, they said.
“It could still pay off for Chinese refiners to wait for further price drops, given that the rise in Russian oil intake so far has just been 3%, based on the current pace-to-date in May,” Xie said. Still, that doesn’t seem to have occurred definitely yet, she said.