Asia will become the default market for Russian oil as the country tries to find buyers for its energy exports, said Dan Yergin, vice president of S&P Global.
Major oil importers in Asia such as China and India have been pressured by soaring oil prices since Russia invaded Ukraine in late February. Besides the appeal of cheaper Russian oil, both Beijing and New Delhi have close ties to Moscow.
Yergin told CNBC’s “Street Signs Asia” on Monday: “It looks like Asia will be the default market for Russian barrels that would normally go to Europe.”
The West has punished Moscow for its economic aggression with the US banning Russian crude oil, The UK plans to do the same and the European Union consider similar measures.
Yergin added, “There’s a lot of self-punishment going on that simply people don’t take oil, banks don’t provide letters of credit, shippers don’t show up, and in fact people in some ports not accept Russian oil.”
I said five weeks ago Russia is an energy superpower… I think it will still be an important factor. But it will reduce energy compared to before.
That leaves Russia with a surplus of crude to sell, analysts say, and that situation could get worse. Russia, part of the OPEC+ alliance, is the world’s largest oil exporter to global markets and the second-largest exporter of crude oil after Saudi Arabia. according to the International Energy Agency.
“I said five weeks ago that Russia is an energy superpower … I think it will still be an important factor. But it will be less energy than it was before,” Yergin said.
Earlier this month, the IEA said Russian crude was being sold at a record discount. Several commodity trading companies recently offered $30 and $25 per barrel discounts on Ural mixes, According to analysts.
In contrast, the price of energy exports of other countries has skyrocketed to levels not seen in more than a decade. Oil prices are about 80% higher than they were a year ago and have fluctuated wildly since the war began.
India’s Craving for Russian Oil
India traditionally gets its crude oil from Iraq, Saudi Arabia, Saudi Arabia, the United Arab Emirates and Nigeria – but they are all adjusting to higher prices right now as oil prices increased.
Industry observers told CNBC that There has been a significant increase in Russian oil deliveries to India since the beginning of March after the Russo-Ukrainian war begins – and New Delhi looks set to buy even cheaper oil from Moscow.
“As you know, India imports 85% of its oil, so this is a real shock to the Indian economy as oil prices rise,” he said.
“India is talking to Russia about buying oil at a substantial discount… but it’s a complex logistical system that moves 100 million barrels of oil a day around the world and to redefine that. , it’s not going to go smoothly,” Yergin said.
Correction: This story has been updated to reflect Dan Yergin who is currently vice president of S&P Global.
