There is still enough oil for everyone – Newspaper Kommersant No. 170 (7371) of 09/15/2022

Global demand for oil is growing more and more slowly – in the second half of the year there will be an excess of it in the market, predicts the International Energy Agency (IEA), estimates of demand growth for 2023 were lowered in June and depend on the prospects for economic development. Oil exports from Russia have fallen by 390,000 barrels per day (bpd) since the start of the military operation, but average annual production may remain unchanged compared to last year, until the European embargo on Russian oil and oil products comes into force.

Switching from sharply risen in price gas to oil will support demand for it, but the growth of global consumption will be more modest than expected: this year it may increase by 2 million b/d (to 99.7 million b/d), in 2023 – another 2.1 million b/d, forecast in IEA. Due to the deteriorating business climate and new covid restrictions in China, demand growth will slow to 1.1 million b/d in the third quarter (from 3.5 million b/d in the first half of the year), and will stop altogether in the fourth quarter. Starting from the third quarter, supply will exceed demand by an average of 1 million bpd in the second half of the year, and the market may come to a balance in 2023 due to a decrease in production in the Russian Federation.

Oil supply in August grew for the third month in a row – over the month the indicator increased by 790 thousand b/d, to 101.3 million b/d, which is 5 million b/d more than a year ago.

OPEC+ countries increased supplies by 340,000 b/d due to increased production in Libya, Saudi Arabia and the UAE. The rest of the countries increased production by another 450,000 barrels per day, mainly due to the United States, Brazil, Norway and Canada.

However, the process is slowing down: by the end of the year, production is expected to increase by only 280,000 bpd, to 101.6 million bpd. On average, for the year, production will be 100.1 million bpd, which is 4.8 million bpd higher than in 2021 (the maximum will be in Saudi Arabia – plus 1.7 million bpd, up to 12.6 million b/d, the US will increase production by another 1.1 million b/d).

In Russia, the first drop in production since April was noted – by 170,000 bpd, to 10.96 million bpd (including condensates, the production of which decreased by 120,000 bpd) – an indicator of 450,000 bpd lower than before the start of the military operation. On average for the year, daily production may reach 10.9 million barrels (comparable to 2021), but by the end of it, the supply of oil may be reduced to 10.2 million b/d, and by the beginning of 2023 to 9.6 million b/d c (1.9 million b/d lower than in February 2022) due to the European oil embargo.

The export of Russian oil and oil products in August increased by 220 thousand b/d, to 7.6 million b/d (including crude oil supplies — by 190 thousand b/d, to 5 million b/d), but compared to February was lower by 390 thousand bpd. Due to lower prices, revenues from shipments abroad in August decreased by $1.2 billion to $17.7 billion.

The entry into force of the embargo on crude oil in early December and on petroleum products in February 2023 is expected to require an additional 1 million b/d of oil products and 1.4 million b/d of oil to be diverted to new markets.

Total deliveries to the EU countries, the USA, Japan and South Korea have already decreased by 2 million barrels per day since the beginning of the year, they were redirected to India (the country increased oil imports by 3.5 times), China, Turkey and other countries, however less, the EU countries still account for 37% of oil exports (previously – 49%).

The IEA does not assess the possible consequences of restrictions on the price of Russian oil (the G7 countries have promised to introduce them, while companies from other countries face sanctions for imports without taking into account this “ceiling”, and the Russian Federation is preparing to stop supplies to countries that will support restrictions). At the same time, the agency notes that restrictions must be accompanied by guarantees of alternative supplies, otherwise importers will compete for a smaller volume. The European Commission is also preparing additional measures to influence the energy market – they plan to withdraw at least 33% of the excess profits of the coal, oil and gas industry in the EU to combat the energy crisis.

Tatyana Edovina