Asia will become ‘standard market’ for Russian oil, says Dan Yergin
Asia is becoming the default market for Russian oil as the country tries to find buyers for its energy exports, said Dan Yergin, vice chairman of S&P Global.
Major oil importers in Asia, such as China and India, are under pressure from oil prices that have risen since Russia invaded Ukraine in late February. In addition to the appeal of cheaper Russian oil, both Beijing and New Delhi have close ties to Moscow.
Yergin told CNBC’s “Street Signs Asia” Monday, “It looks like Asia would be the standard market for barrels of Russian oil that would normally have gone to Europe.”
The West has economically punished Moscow for the invasion, with the US banning Russian crude, the UK planning to do the same and the European Union considering similar measures.
Yergin added: “There’s a lot of self-sanction going on. That’s just people not picking up oil, banks not issuing letters of credit, shippers not showing up and indeed, people in some ports not receiving Russian oil.”
I would have said five weeks ago that Russia is an energy superpower… I think it will still be an important player. But it will be a reduced energy power compared to where it was before.
This leaves Russia with a surplus of crude oil that is difficult to sell and that situation is likely to worsen, analysts say. Russia, part of the OPEC+ alliance, is the world’s largest exporter of oil to global markets and the second largest exporter of crude oil after Saudi Arabia, according to the International Energy Agency.
“Five weeks ago I would have said that Russia is an energy superpower… I think it will still be a major player. But it will be a reduced energy power compared to where it was before,” Yergin said.
Earlier this month, the IEA said Russian crude is being sold at record discounts. According to analysts, a number of trading firms recently offered discounts of $30 and $25 a barrel for the Ural blend.
In contrast, prices for other countries’ energy exports have risen to levels not seen in more than a decade. Oil prices are about 80% higher than a year ago and have been volatile since the start of the war.
India’s hunger for Russian oil
Traditionally, India gets its crude from Iraq, Saudi Arabia, the United Arab Emirates and Nigeria – but all are dictating higher prices as oil prices rise.
Industry observers have told CNBC there has been a significant surge in Russian oil shipments bound for India since early March after the war between Russia and Ukraine began — and New Delhi looks set to buy even more cheap oil from Moscow.
“India, as you know, imports 85% of its oil, so it’s a real shock to the Indian economy if oil prices rise,” he said.
“India is talking to Russia about buying oil at a significant discount … but it’s a complicated logistics system that moves 100 million barrels of oil a day around the world and to change that, it won’t run smoothly,” he said. yergin.
Correction: This story has been updated to reflect that Dan Yergin is now vice chairman of S&P Global.