Russian Oil Exports: from Covid-induced Demand Collapse to Sanctions War

The events in Ukraine have radically altered the situation in the hydrocarbons market. The pandemic-induced demand collapse no longer seems that great a tragedy. Now we are facing a much more serious challenge.

The political West has dramatically increased sanctions pressure on Russia. The ousting of Russia from oil and gas markets has begun. A serious blow has been dealt to Russian oil supplies. The US, Canada, and the United Kingdom have imposed a ban on buying Russian oil. The EU, however, is the main battlefield.

Brussels has announced a policy of dramatic reduction of the presence of Russian oil and petroleum products. It has not yet gone as far as an embargo, but the matter has already been raised several times by individual states.

Active pressure on majors and traders has begun. One by one they have started announcing reduction or even discontinuation of trade in Russian oil. Difficulties arise with payment for supplies and with freight. The differential between Urals and Dated Brent has reached serious values. The IEA happily predicts decline in Russian production by 3 million barrels a day as soon as April. Active manipulation of figures is under way: Western experts speak about exports falling now by 30%, now by 50%.

The key question arises: how credible are these estimates and how realistic are the EU plans to completely give up Russian oil? Are there opportunities to redirect export flows to other countries, primarily China and India? Without exaggeration, this is now the most acute point in the development of the Russian oil industry. Indeed, a real fight for its future is under way.

The new report elaborates on the following subjects:

Dynamics of Russian oil exports

Current structure of Russian oil exports:

• The pipeline/seaborne ratio
• The breakdown of key crude grades and recipient countries
• Destinations of shipments from key ports

Current situation with the main Russian crude grade, Urals

• Key Urals buyers
• Effect of sanctions on sales of the flagship grade
• Traders’ short-term reaction to calls for dropping Russian oil
• Opportunities for redirecting supplies

Competition to Russian oil on the European market

• Comparison of the yield of petroleum products from Urals and alternative grades

Prospects of oil flowing away to China and India

• Specifics of China’s oil imports

Contents of the report: