Revenues from oil exports from Russia are growing despite a drop in supplies

The export of Russian oil in June 2022 decreased by 250,000 barrels/day to 7.4 million barrels/day – the lowest indicator since August last year, according to the report of the International Energy Agency (IEA) dated July 13. At the same time, according to the organization, Russia’s export revenue from the sale of oil against the background of high prices increased by $700 million and reached $20.4 billion.

In January – June, Russia exported an average of 7.75 million barrels per day. Deliveries to the European Union (EU) decreased by 33% to 1.8 million barrels/day from February to the end of June, while to China and India, on the contrary, during the same period, they increased by 6% and 88% to 1.8 million and 0.8 million barrels/day, respectively. At the same time, according to the IEA, in June, Russian oil exports to China and India decreased by 175,000 barrels/day compared to May.

“Nevertheless, given that the volume of deliveries to unknown destinations also increased by 540,000 barrels/day, it is too early to talk about a real drop in exports to China and India,” the IEA report states.

Analysts of the agency note that in June, Russia “surprised again with its volume of oil production”, ensuring the world’s largest increase in supply, so the increase in domestic consumption largely compensated for the decrease in exports. According to the agency, the volume of production of oil, gas condensate and broad fraction of light hydrocarbons (SHFLU, used as a raw material in petroleum chemistry. – “Vedomosti”) in Russia in June increased by 490,000 barrels/day and reached 11.07 million barrels/day. a day This is only 330,000 barrels/day below the production level before the start of the special military operation (SVO) in Ukraine.

On July 8, the President of Russia, Vladimir Putin, during a meeting with members of the government on fuel and energy issues, reported that the level of oil production with gas condensate in June of this year reached 10.7 million barrels per day, which is 500,000 barrels per day higher than in May. This indicator is lower than the IEA’s estimate, but when citing the statistics, Putin did not mention the ШФЛУ. “In general, since the beginning of the year, the level of oil production has exceeded the previous year’s figure by 3.5%,” the president emphasized.

As Vedomosti wrote, Russia began to reorient oil supplies to Asian markets in March-April of this year due to the refusal of Western countries to buy Russian raw materials due to the SVO. The USA and Great Britain announced a full embargo on Russian oil at the beginning of March, and the European Union was only able to agree on a partial ban on sea deliveries of oil from the Russian Federation as part of the sixth package of anti-Russian sanctions on May 31. At the same time, there will be no restrictions on deliveries via the Druzhba oil pipeline with a capacity of 720,000 barrels per day in the near future.

As a result of the introduced restrictions, the Russian oil brand Urals became favorable for consumers, as it traded at a discount to Brent (on average, the discount reached $30 per barrel). Compared to the end of February to the beginning of July, benchmark North Sea Brent rose by 21% to $112 per barrel, American WTI – by 9.5% to $106 per barrel. On July 13, the price of Brent is $100/barrel, WTI – $96/barrel.

Now unfriendly countries, led by the USA, intend to form a cartel of buyers and limit the income of the Russian Federation from the export of oil due to the introduction of an artificial ceiling on its price. The US is trying to set a price limit for Russian oil at a level that would make it profitable for Moscow to continue production, US Treasury Secretary Janet Yellen said on July 13. “We heard that some expressed concern that Russia could simply stop production. I would say that as a response from Russia, it does not make any special sense. We expect to set a price limit at such a level that it will be clearly profitable for Russia to continue mining,” said Yellen (quoted by “RIA Novosti”).

Earlier, the leaders of the “big seven” countries also announced that they plan to limit the prices of Russian oil in order to reduce Russia’s income and stabilize energy prices.

Stock market expert “BCS World of Investments” Igor Galaktionov expects a further decrease in Russian oil exports in July as well. At the same time, he clarifies, budget revenues will remain strong due to the 23% increase in the export duty, which gives an additional $1.42 from each exported barrel. “The decrease in exports can be partially compensated by the growth of seasonal demand in the domestic market, but in autumn the situation can become more tense,” he admits.

“Finam” analyst Alexey Potavin also expects a decrease in export deliveries of Russian oil in the second half of the year. “The main intrigue lies in the plans of Western countries to limit the prices of Russian oil. The reaction of the Russian authorities to this very clearly indicates that the Russian Federation will not voluntarily fall into the set price trap and will raise the stakes in opposition to the West, reducing its production,” he notes.

According to Finam forecasts, until the end of 2022, Brent oil prices will remain in the range of $90-115/bbl. Galaktionov from BKS suggests a price reduction to $80–90 per barrel.

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