Russia dismissed on Tuesday the partial EU embargo on its oil, saying it is confident it would find other buyers for its crude after the European Union reached a compromise deal to ban most Russian imports into the bloc.
Late on Monday, the EU reached an agreement in principle to ban seaborne oil imports by the end of the year with an exemption for pipeline crude.
The sixth package of EU sanctions against Russia will immediately impact 75% of Russian oil imports, and by the end of the year, 90% of the Russian oil imported by Europe will be banned, Charles Michel, President of the European Council, said.
“We will soon return to the issue of the remaining 10% of pipeline oil,” European Commission President Ursula von der Leyen said on Tuesday.
Retweeting von der Leyen’s tweet announcing the sanctions on Russian oil, Mikhail Ulyanov, Permanent Representative of Russia to International Organizations in Vienna, said, “As she rightly said yesterday, #Russia will find other importers,” referring to the Commission’s president.
“Noteworthy that now she contradicts her own yesterday’s statement. Very quick change of the mindset indicates that the #EU is not in a good shape,” the Russian official said.
Russia’s crude oil production has been falling since the Russian invasion of Ukraine, and analysts believe it may have to shut in as much as 3 million bpd as Russian oil is now not only unwanted but also banned in the West.
Earlier this month, Russia said it had increased oil production in May by 200,000-300,000 bpd after a large decline in output and refining in April and dismissed any suggestions that there was a crisis in its oil industry.
“We are in constant contact with our oil and gas companies and we do not see any serious problems that would indicate that our industry is in some kind of crisis,” Russian Deputy Prime Minister Alexander Novak said via news agency TASS.
“Yes, we received a certain shock that allowed us to find new balance points and enter new export opportunities, including redirecting energy resources to new markets, creating new supply chains,” Novak added.
Russia is boosting exports to India and China, but analysts doubt the Asian market would be able to absorb all the 4 million bpd of oil Russia was sending to Europe before the war.
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By Tsvetana Paraskova for Oilprice.com
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Russia is already boosting its exports to both China and India the world’s largest and third largest crude oil importers. So what are 1.95 mbd to these two titans accounting for 26% of the world's traded oil?
By coincidence, China reported today a rise of its purchasing managers' index to 49.6 in May from 47.4 in April meaning rising factory activity and this translates into more oil demand.
The proof is that Russian seaborne oil exports to China have risen from 750,000 barrels a day (b/d) to 1.0 mbd in the first quarter of the year. In addition Russia exported during the same period an estimated 500,000-600,000 b/d to China via its pipelines.
Meanwhile, the EU will be replacing Russian oil at a price of $130 a barrel in coming months thus adding an annualized $14.24 bn to its oil-import bill.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London