Russian oil production has fallen by less than 3% since the invasion of Ukraine, with a swathe of western energy sanctions having only a “limited” effect, the International Energy Agency has found.
In its latest monthly oil report, the IEA said Russia’s oil production in July was 310,000 barrels a day below prewar levels, while total oil exports were down by about 580,000 barrels a day.
Moscow’s exports of crude and oil products to Europe, the US, Japan and Korea had fallen by nearly 2.2m barrels a day since its invasion in February, but the IEA said the rerouting of flows to India, China, Turkey and others, along with “seasonally higher Russian domestic demand, has mitigated upstream losses”.
Its report estimates that Russia generated $19bn (£16bn) in oil export revenues last month, and $21bn in June. It said: “The outlook for world oil supply has been revised upward, with more limited declines in Russian supply than previously forecast.”
In June, China overtook the EU as the biggest importer of Russian crude.
However, the IEA said the EU embargo on Russian crude and product imports, which comes into full effect in February 2023, would result in “further declines” as about 1m barrels a day of products and 1.3m barrels a day of crude “would have to find new homes”.
Russia is expected to cut down on production after the bloc’s sanctions kick in, leading to oil giants including Saudi Arabia benefiting from the rise in European oil demand, the IEA said.
Meanwhile, with natural gas and electricity prices soaring, “incentivising gas-to-oil switching in some countries”, the IEA has raised its estimates for 2022 global oil demand growth by 380,000 barrels a day, to 2.1m barrels a day.
The global heatwave has also seen an increased oil burn in power generation, especially in Europe and the Middle East but also across Asia.
The report added: “EU members have committed to reducing their demand for gas by 15% from August 2022 to March 2023. We estimate that this will increase oil consumption by roughly 300,000 barrels a day for the next six quarters.”
