Russia can find new markets for half of the oil the EU won’t buy
(Bloomberg) — Russia may find new markets for about half of the crude oil exports that the European Union will ban from December, according to energy data company Kpler.
In a research note, Kepler said Indonesia, Pakistan, Brazil, South Africa, Sri Lanka and some countries in the Middle East could together buy up to 1 million barrels per day of crude from Russia next winter.
Russia’s oil industry, which accounts for nearly 10% of global production and is a major source of Kremlin revenue, faces major sanctions after its invasion of Ukraine. European Union members still buy some of the country’s oil, but in December they will ban most imports of Ural crude, followed by a ban on oil products in February.
This could reduce Russian oil production by about 2 million barrels per day compared to pre-invasion levels, unless the flows are distributed elsewhere, according to estimates by the International Energy Agency.
Russian companies have already redirected their shipments to Asia, mainly to India and China, where some European buyers are voluntarily avoiding their oil. This came at a cost, as Urals are traded at significant discounts to world standards.
Redistribution of global crude oil flows may partially displace exports from other OPEC+ members. In Indonesia, “among the main candidates to replace him is Nigeria,” Kepler said, while in Pakistan “we would not be surprised to see light streams of Arab low light” from Saudi Arabia.
The Middle East, which could consume up to 500,000 barrels per day of Russian crude this winter, could redirect oil previously used domestically to export markets, according to Kepler.
“The temptation may be to get the Urals into the refineries and allow the likes of Arab light to flow freely into Asia,” she said.