• Oil supplies are expected to struggle to keep pace with oil demand, says energy forecaster

Will Horner, WSJ

LONDON
EnergiesNet.com 03 17 2023

Russia’s oil-export revenues have roughly halved in the space of a year while its oil exports have remained largely unchanged, suggesting Western sanctions are taking effect and cutting Moscow’s income without restricting global oil flows, the International Energy Agency said Wednesday.

The Paris-based energy forecaster said that a year on from the start of the war in Ukraine—and after a barrage of Western sanctions that saw Russia’s biggest buyers in Europe turn their backs on Russian crude—Moscow had largely succeeded in finding new customers but at a sharp cost to its oil-export income.

The signs were evident not just in falling receipts from oil sales, but also in the longer voyage times Russian tankers were being forced to take, the lengthy transit times Russian oil cargoes were spending at sea and in a surge of time-consuming ship-to-ship transfers, the IEA said in a monthly report.

The latest measures imposed by the U.S., the European Union, and the other members of the Group of Seven as well as Australia have barred the Western insurers, financiers and shipping firms that underpin most of the world’s oil trade from dealing in Russian oil cargoes unless they are sold below levels set by those Western countries.

Those countries have also largely stopped buying Russian oil altogether, meaning the price caps are aimed at reducing the income Moscow earns on its oil sales elsewhere without preventing it from flowing around the globe. Doing so could tighten an already tight oil market and send global crude prices sharply higher.

In February, Russian oil exports fell by 500,000 barrels to 7.5 million barrels a day after a particularly good month for Russian oil exports in January, as diesel and other refined oil products were rushed out of Russia before sanctions came into effect.

While the drop took Russia’s oil exports back to levels in line with recent months, the income it earned on them slumped to an estimated $11.6 billion, the IEA said, $2.7 billion less than the previous month and roughly half the $22.1 billion Moscow was earning on its oil exports in March 2022, immediately after the outbreak of war in Ukraine.

“The G-7 sanctions regime has been effective in not restricting global crude and product supplies, while simultaneously curtailing Russia’s ability to generate export revenue,” the IEA said.

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The IEA said it now expects Russian oil production to stand at 10.4 million barrels a day this year, 300,000 barrels a day more than it was forecasting last month, but still 740,000 barrels a day less than in 2022. Russia has largely managed to maintain its production levels as it has sought out alternative customers, particularly in India and China.

The IEA also noted that, in seeking customers farther afield, Russian ships were faced with longer journey times, which currently average close to 22 days from its Eastern ports and roughly 24 from its Western ports, compared with journey times of roughly 10 days and 15 days, respectively, in January 2022.

Russia has also turned to ship-to-ship transfers operations—in which oil is pumped between vessels at sea, often in sheltered waters in the Mediterranean—to help move cargoes longer distances. Such ship-to-ship transfers had risen significantly, the IEA said, to around 180 in January, roughly double the average level in 2021.

In the same report, the IEA leaves its forecasts for global oil demand and supply this year mostly unchanged. It said it still expects demand to grow by 2 million barrels a day this year, largely as a result of China’s economy recovering following an end to Covid-19 lockdown measures.

The IEA expects total demand this year to stand at 102 million barrels a day, 100,000 barrels a day more than it was forecasting last month. Oil supplies are expected to struggle to keep pace with oil demand, threatening to push the oil market into a supply deficit in the second half of the year, the IEA said.

The IEA said it expects total oil supplies of 101.6 million barrels a day this year, 300,000 barrels a day more than its forecast last month, but still behind anticipated levels of demand.

Write to Will Horner at william.horner@wsj.com

Appeared on the WSJ in the March 16, 2023, print edition as ‘Oil Sanctions Crimp Russia’s Export Sales’.