Dan Yergin says Asia will become the “virtual market” for Russian oil

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 come under pressure from soaring oil prices since Russia invaded Ukraine in late February. Besides the allure of cheaper Russian oil, both Beijing and New Delhi have close ties with Moscow.

“It looks like Asia will be the default market for Russian barrels of oil that would normally have gone to Europe,” Yergin told CNBC’s “Street Sings Asia” program on Monday.

The West punished Moscow for the invasion economically as the United States banned Russian crude The UK plans to do the same And the European Union weighs similar measures.

Yergin added, “There are a lot of self-punishment going on, which is simply that people don’t pick up oil, banks don’t provide letters of credit, shippers don’t show up, and in fact, people at some ports don’t receive Russian oil.”

Five weeks ago I would have said that Russia is an energy superpower…I think it still plays an important role. But it will be a lower energy power compared to what it was before.

Analysts said that leaves Russia with a surplus of crude oil that is difficult to sell and is likely to worsen the situation. Russia, which is 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.

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“I would have said five weeks ago that Russia is an energy superpower…I think it will continue to be an important player. But it will be less energy energy than it was before,” Yergin said.

Earlier this month, the International Energy Agency said Russian crude is being sold at record discounts. Two commodity trading companies recently offered discounts of $30 and $25 per barrel for Ural blend, According to analysts.

In contrast, the energy export prices of other countries have It has risen to levels not seen in over a decade. Oil prices are about 80% higher than they were a year ago and have been volatile since the war began.

India’s appetite for Russian oil

Traditionally, India gets its crude from Iraq, Saudi Arabia, Saudi Arabia, the United Arab Emirates and Nigeria – but they are all charging higher prices right now with higher oil prices.

Industry watchers told CNBC that There has been a significant uptick in Russian oil shipments to India since early March After the outbreak of the Russo-Ukrainian war – and it seems that New Delhi is ready to buy more cheap oil from Moscow.

“India, as you know, imports 85% of its oil, so it’s a real shock to the Indian economy when oil prices go up,” he said.

“India is talking with Russia about buying oil at a huge discount … but it is a complex logistics system that transports 100 million barrels per day of oil around the world and to reset that, things will not go smoothly,” Yergin said.

Correction: This story has been updated to reflect that Dan Yergin is now S&P Global Vice President.

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