- Russian oil production has remained much stronger than expected since the invasion of Ukraine, the IEA said Thursday.
- Its average output in July was down around 200,000 barrels a day from the first quarter, and was higher than for all 2021.
- Russia has successfully rerouted its oil exports away from Europe toward Asian countries such as India and China.
Russia is producing far more oil than expected this year as it reroutes supplies towards Asia and domestic demand grows, according to the International Energy Agency.
The IEA said in its latest report Thursday that Russia produced 9.8 million barrels of oil a day in July, an increase from both May and June.
The figure was only slightly lower than the 10 million barrels a day average seen in the first quarter and higher than the 9.6 million barrels a day average for the whole of 2021.
The data is the latest sign that Russian oil production has held up firmly despite the tough Western sanctions put in place after Vladimir Putin’s invasion of Ukraine in late February.
In March, the IEA said Russian production was likely to drop by as much as 3 million barrels a day from April. The Paris-based organization later revised its figures to predict a smaller drop in production, and on Thursday said Russian output had surprised again.
“The outlook for world oil supply has been revised upward, with more limited declines in Russian supply than previously forecast,” the organization said.
“While Russia’s exports of crude and oil products to Europe, the US, Japan and Korea have fallen by nearly 2.2 mbd since the start of the war, the rerouting of flows to India, China, Türkiye and others, along with seasonally higher Russian domestic demand has mitigated upstream losses.”
The IEA said Russia has successfully managed to reroute around two-thirds of its oil supplies. Analysts have told Insider that Putin’s gas-guzzling army and the fact that Russians are struggling to go on vacation abroad have kept domestic demand strong.
JPMorgan analysts said in a note to clients last month that the expected drop in Russian production “never happened.”
“The market consensus was too pessimistic about Russia’s capability to re-route volumes to other buyers,” the analysts, led by Natasha Kaneva, said. “Russia’s exports adjusted towards other buyers without a serious disruption to its production.”
However, the European Union is phasing out imports of Russian oil and aims to cut 90% of its purchases by the end of the year. The IEA said the embargo means more than 2 million barrels a day of Russian oil and oil products will need to find a new home.
Despite production staying strong, the IEA said Russian export revenues fell from $21 billion in June to $18 billion in July as oil prices fell and domestic purchases increased.
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