Law of communicating energy resources – Newspaper Kommersant No. 146 (7347) dated 12.08.2022

Rising prices for energy resources, primarily natural gas, will lead to an additional increase in demand for oil – its consumption may increase by 2.1 million barrels per day (b / d) this year, the International Energy Agency (IEA) predicts in its August report. The supply of oil will also grow significantly – in July, its global production has already increased by 1.4 million barrels per day. The scale of the fall in Russian supplies is still below forecasts, however, lower oil prices reduce export revenues, and the expected entry into force of the European embargo will lead to an additional contraction in supply volumes, the IEA expects.

An increase in oil consumption, including against the backdrop of a partial switch from gas generation, will lead to an increase in demand for it this year by 2.1 million b/d, to 99.7 million b/d, according to the updated IEA forecast. Compared to the previous month, the forecast has been increased by 380,000 bpd. The effect of switching from gas to other types of fuel is observed primarily in Europe, but also in the Middle East and Asia, the agency’s experts say. Next year, consumption is also expected to rise by 2.1 million b/d to 101.8 million b/d.

Oil supply in July, meanwhile, has already increased by 1.4 million b/d, to a record 100.5 million b/d (a month earlier, the increase was 690,000 b/d). This is the highest level since January 2020. OPEC+ countries increased deliveries by 530,000 bpd over the month, while other countries — by 870,000 bpd. At the same time, OPEC+ agreed to increase the production ceiling in September by only 100,000 b/d, pointing out that limited spare capacity (they total 2.2 million b/d in Saudi Arabia and the UAE) should be used with caution and only as a response to severe supply restrictions.

By the end of the year, deliveries are expected to increase by another 1 million b/d, up to 101.6 million b/d, including in the OPEC+ countries, the increase may reach 400 thousand b/d, in the rest – 640 thousand b/d. In 2023, the increase may reach 1.7 million b/d, to the level of 101.7 million b/d. “Despite the reduction in Russian supplies this year, against the backdrop of increased supplies from other countries, oil reserves may grow by the end of this year and continue to grow in the first half of next,” the IEA expects.

Russian production in July increased by 20 thousand b/d to 9.8 million b/d and, according to the IEA, was only 310 thousand b/d lower than before the start of the military operation (the figure is calculated from the total production total with condensates – 11.09 mln b/d). Current production is 1.03 million b/d below the quota stipulated by the OPEC+ deal. The total volume of exports has decreased by 580 thousand b/d since February, including in July deliveries abroad decreased by 115 thousand b/d, to 7.4 million b/d. At the beginning of the year, exports amounted to about 8 million b/d.

Due to full or partial restrictions, deliveries to the US, UK, EU countries, South Korea have decreased by 2.2 million barrels per day since the start of the military operation, but two-thirds of these exports were redirected to other countries, in particular, to China , India, Turkey. Nevertheless, the export earnings of Russian companies decreased from $21 billion in June to $19 billion in July, due to both a reduction in supply volumes and a drop in oil prices (from their peak in June they fell by about $30 per barrel).

By the end of 2022, Russian production may average 10.86 million bpd, unchanged from last year. However, after the entry into force of the European embargo on oil at the end of this year, even more supplies will have to be redirected – about 1.3 million b / d of oil and 1 million b / d of oil products. As a result, Russian production may drop to 9.5 million b/d (back in June, the IEA expected a more pronounced drop to 8.7 million b/d). OPEC, which also released a monthly report yesterday, raised its estimate for production in Russia for this year from 10.63 million to 10.88 million bpd, while next year the organization expects a reduction in Russian production by only 0.4 million b/s — up to 10.5 million b/s.

Tatyana Edovina