World needs Russian oil

The Russian oil industry keeps functioning despite the harsh conditions imposed. National oil companies, apart from adapting to the need of circumventing Western sanctions (aimed to undermine exports and production), have been simultaneously handling the task of reducing supply under the OPEC+ deal. The latter is required to stimulate growth of global oil prices.

And yet the industry has been adequately rising to the occasion. Exports and production decline not that sharply. The West is particularly surprised by the steady Russian oil flows shift from Europe to Asia. The International Energy Agency (IEA) claims that 70 percent of those are transported engaging G7 companies. This year, new players have supplied at least half of all the Russian exports of oil and petrochemicals, Reuters notes. And again, not without Western structures, it turns out.

Russian oil companies faced with sanctions have been testing supplies to Middle Eastern refineries seeking an oil discount advantage. According to Kpler, August has seen LUKOIL’s first shipment of low-sulfur fuel oil from its Caspian Filanovsky field to the Emirati ADNOC’s refinery in Er-Ruwais.

Since last year, Russian oil companies have been actively exporting oil and petroleum products to UAE’s Fujairah, including for blending (mixing varieties from different manufacturers) and subsequent re-export. Prior to Washington and Brussels’ sanctions against Moscow hampering its energy exports, operations of the kind were all but absent.

Factories in China and India are still major consumers of Russian black gold. Reports on the success of Russian oil and petrochemical supplies to these two countries has already become commonplace over the past six months. In January to July, crude oil shipments to China alone exceeded 60 million tons (a 25% increase against last year), as evidenced by data released on August 20 by China’s General Administration of Customs.

Higher transportation costs help Russian companies earn a lot more from oil sales to India than previously thought. A mid-August think piece in the Financial Times (FT) suggested that tanker freight charges could have exceeded $1 billion in the three months before. During this period of time, about 40 percent of oil shipped from the Baltic ports was transported on Russian-linked tankers. FT "discovered" these solid enroute fleet earnings as per transportation costs calculated by the Argus agency.

Progress is also being recorded in the new markets, with Brazil having boosted imports of Russian fuel from 31.6 thousand to 234.9 thousand barrels per day (b/d) in six months, buying it at a discount. The government has been restraining that country’s fuel price growth, and the ability to purchase petrochemicals in Russia has simplified the solution, Bloomberg notes. According to Kpler, Brazil has become the world’s second largest buyer of Russian diesel fuel, second to Turkey.

Moreover, here is encouraging news from Pakistan: the local PRL company intends to keep importing and refining oil from Russia, its CEO Zahid Mir said on August 14, adding that negotiations were underway on a new Russian supply deal.

Russian Energy Minister Nikolai Shulginov has previously clarified that supplies to Pakistan are going to occur in еру currencies of friendly countries, with Russia providing discounts "on an equal commercial basis."

The confident course of Russia's sectoral export adaptation has contributed to restored federal budget revenues: the average cost of Urals oil on July 15 to August 14 exceeded $70 per barrel, this country’s Ministry of Finance claims. As compared to the previous period (June 15 — July 14 saw a figure of $58), the price grew by over $12 to exceed the $60 price cap set by the West. Based on the regulator’s price survey, oil export duty will be $21.4 per ton starting September 1, which is $4.5 higher than July’s.