Full recovery of the industry after the sanctions will depend on the successful redirection of supplies, analysts say
Last month, oil production in Russia rose by 5% after a sharp decline in April, the newspaper Vedomosti reported on Friday, citing an industry source.
Production in May was 10.2 million barrels per day, compared to 10 million in April, but still 2.5% less than in May 2021.
Russian Deputy Prime Minister Alexander Novak said that oil production in 2022 could fall to 480-500 million tons from 524 million tons in 2021. However, according to the official, the government expects to gradually resume production by about 1 million barrels per day. this month.
According to Vedomosti, in January-May Russian oil production increased production by about 3.5% compared to last year to 219.9 million tons. Leading Surgutneftegaz (13%), Lukoil (10%) and NNK (9%).
Oil exports grew by almost 13% to 102.7 million tons, according to statistics. This is despite the fact that some foreign oil traders are hesitant to buy Russian oil because of the risk of secondary sanctions.
The United States and Britain have already imposed an embargo on Russian oil, while the EU agreed on a partial ban on Thursday. Under the bloc’s sixth round of sanctions, imports of Russian oil into the EU by sea will be banned for six months. However, restrictions on imports through the Druzhba pipeline have been postponed. The Czech Republic, Hungary and Bulgaria have been temporarily exempted from the embargo on Russian oil supplies.
To attract potential buyers, Russia has offered discounts on its oil, which analysts say remains attractive for the country’s exports despite a Western ban. For example, Russian oil exports to India in May increased almost 25 times compared to last year. Exports to China also grew, increasing by 4% year-on-year in April to 6.55 million tonnes. Russia lags only behind Saudi Arabia as the main source of goods for China.
Experts predict that in the coming months, Russian producers will continue to reorient export flows to Asian markets, which will ensure further resumption of production. According to forecasts made by Refinitiv, Russian oil exports to India could grow to a record 900,000 barrels per day, and additional supplies to the Chinese market could reach 400,000 barrels per day as demand in the country recovers after the recent blockade of Covid-19. .
“If the refusal of European consumers to import maritime shipments from the Urals is gradual, it is safe to assume that all falling exports within a month and a half will be redirected to Asia,” – said “Vedomosti” senior analyst at Alfa-Bank Nikita Blokhin. , adding that further redirection of export flows to Asian markets will help stabilize production at 10.3 million barrels per day.
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