An embargo will destroy Russia’s oil industry

The EU’s embargo on Russian oil will bite the country’s crude oil exports – a cornerstone of the country’s economy – but will not do much damage until sanctions actually kick in.

For now, analysts say, Russia’s oil production is proving to be a bargaining chip, with European buyers and others failing to buy crude at around $ 30 a barrel for international standard Brent crude.

Petrol ship monitoring company Kpler estimates that Russian oil production in May was about 200,000 barrels per day, compared to 10.2 million barrels per day in April. However, it was about 800,000 barrels a day below the February level.

Kpler expects Russian production to fall by a million barrels a day, or about 10 percent, due to the EU embargo. The collapse will contribute to what many analysts expect Widespread erosion in Russia’s energy sector In the coming years, as large oil companies leave the country, restrictions on imports of Western technology will be curtailed.

There has been a recent improvement in production as Russian refineries have increased their production after routine maintenance, and buyers have lost some caution when dealing with Russian oil.

“Buyers have become accustomed to handling Russian goods,” said Kpler’s analyst Victor Katona.

For example, Russian exports to the European Union by sea fell by about 440,000 barrels a day from February to March, but have remained relatively stable since then at about 1.2 million barrels a day. Italy, which carries about 400,000 barrels a day, has been a major buyer, although a quarter of that oil is shipped to Central Europe via Trieste.

Kpler estimates that an average of about 600,000 barrels of oil per day flowed from Russia to countries such as Hungary, Slovakia, Poland and Germany in May.

Hungarian oil company MOL said earlier this month that its profits from refining would “skyrocket” due to the discount on Russian Ural crude oil. The Hungarian government insisted on sanctions on Russian oil, arguing that it had no choice but to rely on pipeline exports from Russia as a landlocked country.

In the meantime, buyers will be stocking up on cheap oil. India, which buys 700,000 barrels a day in May, has come to the rescue of Russia.

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