The Last Days of the Great Oil Age: how Russia will have to reduce exports of raw materials

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Forbes on the prospects for Russian oil exports after the opening of the Strait of Hormuz and the termination of US sanctions exemptions for Russian oil.

"The price level that we are currently seeing will not be sustainable," Alexey Gromov says. "As soon as the oil trapped in the Persian Gulf is used, prices are likely to rise to the range of $75-77 per barrel."

The reason for the significant increase in Russian exports was a combination of factors, Alexey Gromov explains. According to him, Russian companies sought to sell as much raw materials as possible, taking advantage of the favorable price environment resulting from the crisis in the Persian Gulf and the temporary suspension of US sanctions restrictions from April 17 to June 17.

Gromov cites problems with Russian oil refining as another factor that influenced the increase in Russian supplies.

"Oil production continues, and when some refineries are shut down, primarily due to UAV attacks, oil that is not processed for the domestic market is redirected for export," the expert says.

But luck is turning away from Russia. Exports will decrease, and they are already declining. A serious shortage of petroleum products forces the Russian authorities to urge oil companies to maximize supplies to the domestic market, Gromov says. As a result, refineries that were going to leave for scheduled repairs were postponed and will try to maximize their processing.

Another reason that prevents Russia from increasing exports is the reduction in production, Gromov notes. According to OPEC, in May, with Russia's quota of 9.669 b/d, it was able to produce only 9.009 b/d. Russian companies, the expert explains, have reduced their investment programs for 2026 in the face of last year's price cuts, sanctions and a surplus of raw materials on the market.

Iran, having gained the opportunity to sell oil to a wide range of countries and not limited to China, began offering it to other buyers, mainly India and Japan, hoping to get more favorable prices, the analyst notes.

The entry of large volumes of unsold Iranian oil into the market increased competition and led to a drop in world prices, Gromov says.

Russian supplies will remain the main ones for China, given that Iran is trying to explore alternative routes, and Venezuela is not selling oil to China, Alexey Gromov adds. But Beijing, as a key buyer, given the changed market conditions, may demand more favorable prices from Moscow, and it will have to agree, he says.