According to a recent report by the International Energy Agency (IEA), the discount on Russian crude oil has reached its lowest level since March 2022, falling by $12.20 per barrel. Simultaneously, the weighted average export price of crude oil has risen by $8 per barrel, reaching $81.80 per barrel in September 2023.
It’s worth noting that despite facing sanctions from Western nations, Russia’s oil exports continue to be profitable. The report reveals that Russian oil export revenues surged by $1.8 billion in September 2023, reaching a high not seen since July 2022.
The report also indicates a significant increase in total oil exports, with a rise of 460 thousand barrels per day (kb/d) to reach 7.6 million barrels per day (Mbd). Of this increase, crude oil accounts for 250 kb/d. Consequently, the discount on Russian crude oil has narrowed to $12.20 per barrel, marking its lowest point since March 2022.
Following the Ukraine-Russia conflict, European countries reduced their imports of Russian crude and gas. In response, Russia redirected its supplies to Asia, with India emerging as a major beneficiary of discounted Russian crude. Over the seven months following the conflict, Russia transformed from being responsible for less than 2% of India’s oil imports to becoming India’s primary oil supplier.
According to data from Vortexa, a London-based market intelligence provider, India imported nearly 36% of its total crude requirements from Russia in September 2023, amounting to 1.58 million barrels per day (Mbd). This marked a significant increase from the 1.44 million bpd imported from Russia in August 2023. However, as Russia’s discount diminished, India began to revert to its traditional oil suppliers, including Saudi Arabia and Iraq.
Furthermore, the report notes that the ongoing Israel-Hamas conflict has not directly affected oil flows. The report predicts an increase in global crude oil supply by 1.7 million barrels per day in 2024 and 1.5 million bpd in the current year, reaching record highs. This increase is expected to be primarily driven by non-Organization of the Petroleum Exporting Countries (OPEC) sources, including the United States and Iran.
As stated in the report, “World oil output increased by 270 kb per day in September to reach 101.6 mb/d, led by higher production from Nigeria and Kazakhstan. The Israel-Hamas conflict has not had any direct impact on oil flows… Overall OPEC+ output is set to decline in 2023, although Iran may rank as the world’s second-largest source of growth after the United States.”