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Russian oil exports will grow by 7.5% to 242 million metric tons in 2022 while oil output is expected to increase by 2%, Russia’s deputy Prime Minister Alexander Novak told TASS in an interview. Novak stated earlier that Russian oil exports have grown steadily despite the pressure that the industry is facing due to western sanctions as companies have reconsidered logistics schemes and made agreements on payments. The deputy prime minister revealed that Russian exports are currently being redirected to the Asia-Pacific region, Africa and Latin America.
Despite the bullish projections by Russia’s deputy PM, Reuters has reported that exports of Russia’s flagship Urals crude blend from the Baltic Sea ports will probably fall to around 5 million tonnes this month from 6 million tonnes in November, thanks to an EU embargo on Russian oil and a Western price cap. Some estimates have predicted it could fall as low as 4.7 million tonnes.
The $60 per barrel price cap introduced by the European Union, G7 nations, and Australia allows non-EU countries to import seaborne Russian crude oil, but prohibits shipping, insurance, and reinsurance companies from handling cargoes of Russian crude unless it is sold for under $60.
Traders have reported to Reuters that Russia is struggling to fully redirect Urals exports from Europe to other markets such as China and India and is also having a hard time finding enough suitable vessels.
Russia’s problems have been compounded by a shortage of non-western tonnage, moderate demand for the grade in Asia, especially in China, and a weak export economy. Indeed, Reuters has reported that Russia’s pipeline monopoly Transneft has been unable to fill some of the available loading slots due to a lack of bids from producers, while other slots were postponed or canceled. Only China, India, Bulgaria, and Turkey are currently willing to buy the Urals with the blend now being sold to export markets at below overall production cost, including local levies.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.