Russia's Revenues From Oil Exports Collapse To A Minimum

Key buyers in Asia have staged a boycott.

Forced discounts of more than $20 a barrel and a boycott of key buyers in Asia have dropped revenues for Russian oil companies.

Average weekly revenue from exporting "black gold" from Russia abroad fell to $1.21 billion as of Nov. 16, the lowest level since March 2023, Bloomberg reported, citing data from Argus and Kpler. Compared to the end of October, oil producers have lost one in five dollars of revenue: four weeks ago, average revenue reached $1.48 billion a week.

Since then, Russian oil prices have collapsed: last week, the cost of a barrel of Urals, Russia's main oil export grade, plunged to $36 a barrel, while discounts reached $23 a barrel, a 2.5-year record.

The U.S. sanctions on Rosneft and Lukoil have jeopardized two-thirds of supplies to India and China, key markets that account for 90% of Russia's oil exports.

Chinese refineries, according to Kpler estimates, have cut purchases from Russia by 66% for December, the month when U.S. sanctions will finally take effect. Demand has sagged by the same amount in India, where five major refineries - Reliance Industries, Bharat Petroleum, Hindustan Petroleum, Mangalore Refinery and Petrochemicals and HPCL-Mittal Energy - have given up Russian-origin barrels.

Tankers continue to take oil out of Russian seaports - 3.29 million bpd, according to Bloomberg estimates for the week ended Nov. 16. However, more oil remains in tankers drifting without buyers. JPMorgan estimates that about a third of Russia's oil exports - or 1.4 million bpd - are "stuck" at sea.

Sanctions against Rosneft and Lukoil, which account for every other barrel of oil production and exports in Russia, "could have the most far-reaching implications for global oil markets" and carry "the risk of a significant decline" in Russian oil production, the International Energy Agency (IEA) said Thursday.

The emerging fear is what distinguishes the latest US measures from previous restrictions, said Vandana Hari, founder of Singapore-based analyst firm Vanda Insights: "The US sanctions on Rosneft and Lukoil could be a tipping point to some extent."

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