Key Takeaways:
- Russia sets record oil output for the month of August.
- China and India welcome Russian oil.
- The next few months will reveal the resolve of a nation under sanctions.
The Institute of International Finance (IIF) reported that Russia exported more oil last month than in August. An investigation by the IIF found that Greek-owned tankers were the biggest help to Russia in shipping oil to outside markets.
It was also reported that exports neared 160 million barrels for August. IIF chief economist Robin Brooks commented on the situation, saying:
“Russia exports most of its crude via foreign-owned oil tankers. The volume of those shipments in August 2022 exceeds any prior year, thanks to Greek-owned oil tankers who shifted capacity to transport Russian oil.”
Russia Still Has Friends In The Oil Business
The 160 million barrel output was by no means the monthly high of the year, but the surprise came because it was the highest ever on record for August.
Emerging markets (EM) China and India are Russia’s top destinations for crude oil, receiving a combined total of 45.2%. Next is the Netherlands at 13%, followed by Germany at 10%. Interesting to note is that in 2021 only 4% of Russia’s exports went to the United States.
Due to the war in Ukraine, Russia’s exports to the US are now down to zero – Washington has since banned all oil and gas imports.
Economists previously forecasted a decline in output due to lower flows from smaller oil producers.
For the first three weeks of August, Russia pumped over 10 million barrels of crude daily, which was 1.9% below the July level. However, Russia warned that countries that applied sanctions might not see the results they hoped for.
Europe is now experiencing somewhat of an energy crisis. The word “somewhat” is used rather loosely as it is estimated that energy costs are up around 700% for the current year. Please see Coin Chapter writer Karen Mkrtchyan’s informative article detailing the European situation.
Sanctions Not Too Punishing At This Time
Thus far, sanctions are not affecting Russia’s oil exports as much as desired. In addition, western nations have imposed several sanctions against the invasion of Ukraine, but the results have had their limits.
Although Russia appears to be dealing successfully with oil production and exporting, the output is expected to fall about 20% by the beginning of next year due to an EU ban set to go full force at that time.
Some analysts believe if Russia has not crumbled from the current bans, they will remain durable next year.
Last Friday, September 2, 2022, G7 ministers agreed to cap Russian oil prices. The G7 asked other countries to provide input on the price cap decision and develop targeted measures to ensure vulnerable countries maintain access to energy markets.
Russia’s resolve is intact for now. We will look to this winter and early 2023 for further evidence of the country’s oil production and export strength.
