A European Union embargo on Russian oil would affect the country’s crude oil exports, a cornerstone of the country’s economy, but it may not do much harm until the restrictions actually begin.
At the moment, analysts say, Russian oil production is proving to be resilient as European and other buyers seize the opportunity to buy crude at a discount of about $ 30 a barrel from Brent crude, the international standard. .
Kpler, a company that tracks oil transportation, estimates that Russian oil production rose about 200,000 barrels a day in May to 10.2 million barrels a day compared to April. Still, that was about 800,000 barrels a day below February levels.
Kpler predicts that if the European Union reaches an agreement on the embargo, Russian production would drop another million barrels a day, or about 10 percent, once the restrictions take effect. The recession would contribute to what many analysts expect is widespread erosion of Russia’s energy industry in the coming years, as major oil companies leave the country and sanctions slow down imports of Western technology.
The recent increase in production came as Russian refineries increased their production after regular maintenance and buyers lost some of their distrust of handling Russian oil.
“Buyers have become accustomed to dealing with Russian cargo,” said Viktor Katona, an analyst at Kpler.
Russian exports to the European Union by sea, for example, fell by about 440,000 barrels a day from February to March, but have since remained relatively stable at around 1.2 million barrels a day. Italy has been a big buyer, grabbing about 400,000 barrels a day, although about a quarter of that oil is shipped to Central Europe via Trieste.
Kpler estimates that an average of about 600,000 barrels of oil a day flowed through pipelines from Russia in May to countries such as Hungary, Slovakia, Poland and Germany.
Hungarian oil company MOL said earlier this month that its refining profits were “skyrocketing” due to the discounting of Russian Urals crude. The Hungarian government has pushed for sanctions on Russian oil, arguing that, as a landlocked country, it has no choice but to rely on pipeline shipments from Russia.
In the meantime, buyers are likely to buy cheap oil. India has come to the rescue of Russia, buying more than 700,000 barrels a day in May.