Alexey Belogoryev, Research and Development Director at the Institute for Energy and Finance, commented to the Davydov.Index online magazine on the reasons for the Russian oil exports growth.
Alexey Belogoryev argues that the IEA reported a two-year record growth in Russian oil exports:
“The International Energy Agency is not alone in its estimates – I would say it relays the estimates of other organizations, in particular, the estimates of Reuters and Bloomberg, which track the movement of all oil tankers. They also noted in March a sharp increase in the supply of Russian oil and oil products. According to Bloomberg, these deliveries even exceeded 4 million bpd, indeed the highest level since last spring.
The reasons for this growth are related to the general state of the world oil market, which is in a rather fragile balance. On the one hand, there is still a confident supply surplus, on the other hand, this surplus is not so large, and it is gradually melting away.
And from the beginning of May, a gradual reduction in production by OPEC+ countries will also be added to this equation. Therefore, Russian oil remains in demand simply from the point of view of the overall balance, and today, objectively speaking, there is nothing to replace it with.
The drop in export volumes from Europe led to the redirection of export flows to other regions, primarily to Asia. And the oil that used to go to China, India and Turkey from other countries, primarily from the Middle East, was partially reoriented to Europe. That is, there was a mutual substitution, and the total amount of deliveries of all exporters remained approximately the same.
The second reason for the interest in Russian oil is that it is subject to discounts. To tell the truth, not at the level of 20-30 dollars per barrel, but much less. The discount that the end consumer receives is usually $5-$10 per barrel. However, this is still significant for many buyers, so Russian oil remains competitive in terms of price."
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