Russia is confident that it will be able to restore in June oil production lost in March and April, with this month seen as "maximum recovery relative to previous levels," Russian Deputy Prime Minister Alexander Novak told state TV channel Rossiya 24 on Thursday.
"Our production fell slightly in March and April. It recovered to some extent in May. We see a bigger recovery in June," Novak said, as carried by Russian news agency Interfax.
"We are finding a point of equilibrium in the situation that is emerging due to restrictions, changes in logistics chains, and rising shipping costs. I think in June we will have the maximum recovery relative to previous levels," the Russian official added.
Speaking to Russian agency TASS on Thursday, Novak also warned that there could be a "huge deficit of petroleum products in the European Union" following the EU's decision to ban seaborne imports of Russian crude and products within eight months.
The deputy PM also expressed confidence that Russia will find new buyers for its oil after the EU embargo.
"I am confident the market will be balanced; new transport and logistical chains will be built. There will be new relations, new markets," TASS quoted Novak as saying.
Russia's assurances that it will see a recovery in its oil production and find new buyers come just as Moscow and fellow OPEC+ members decided to ramp up the monthly oil production increase of the group to nearly 650,000 barrels per day (bpd) for July and August.
Despite the expected production boost that Russia claims, it will find it increasingly difficult to move its oil even to third countries outside the EU, after the EU and the UK initiated moves to isolate Russia from access to oil cargo insurance, which would severely affect its ability to export crude.
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.
Russia could see about 2 million bpd - 3 million bpd of its oil exports-or about a quarter of the country's oil production-disappear from the global market by end-2022, Fitch Ratings said on Wednesday.
"We believe that redirecting of all Russian oil and products volumes may not be possible due to infrastructural limitations, buyers' self-restrictions and logistical complications, such as potential restrictions on providing insurance for cargos carrying Russian oil," Fitch added.
By Tsvetana Paraskova for Oilprice.com
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Comments
He also expressed confidence that Russia will find new buyers for its oil after the EU ban. Russia is already boosting its exports to both China and India the world’s largest and third largest crude oil importers who between them account for 26% of globally-traded oil.
On the other hand, the EU decision to ban seaborne imports of Russian crude and products will create a huge deficit of petroleum products within the EU and add billions to its oil-import bill thus accelerating the onset of a harsh recession.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London