The Magazine for Asian Investors
Russia, one of the world’s most important crude oil exporters, suffered a further setback in April. Asian customers, who can buy Russian crude oil cheaply, are currently benefiting from this.
According to the International Energy Agency (IEA), Russia had to cut crude oil production by around 700k barrels per day in April. However, these are only initial reports; the IEA believes that the figure could increase to 1.5 million barrels per day. The war in Ukraine has dragged on for over 2 months now and there is still no end in sight. Therefore, buyers are currently avoiding Russian oil products, which means that Russia will have to reduce its oil production first and Russian oil stocks will fill up.
As of May, the IEA estimates a further decline in Russian oil production to 3 million barrels per day. The reason for this is the expansion of sanctions, which will apply not only to Russia but also to the buyers of Russian oil.
Asian buyers are currently rejoicing because they can currently buy the greatly reduced Russian oil cheaply. There are also reportedly oil swaps where Asian buyers are buying Russian crude and selling it to European customers. This is currently a lucrative business as oil prices remain above the $100 per barrel mark.
Meanwhile, demand from China has not increased as China continues to seal off key cities of major economic importance with its zero covid policy. Shanghai is currently the most important example, with reports from China suggesting that the capital Beijing is also being sealed off to contain the spread of the coronavirus.