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Russia oil revenues jump on exports to energy hungry Asia

By Munikoti Rochan

19:27, 18 July 2022

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An oil tanker on the Volga river, in Russia.
Moscow's discounted crude is bagging big money - Photo: Getty Images

Russia’s oil exports declined in June, to their lowest since August 2021, according to the International Energy Agency (IEA).

However, Moscow’s revenues from shipments surged last month on higher prices and from sales to alternative buyers – the energy hungry markets in Asia.

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Russian oil exports fell by 250kb/d month-over-month to 7.4mb/d in July, with the decline led by crude oil. Product shipments, meanwhile, were relatively stable at 2.4mb/d.

Export revenues, however, increased by $700m month on month on higher oil prices, to $20.4bn, 40% above last year’s average, according to the IEA’s latest Oil Market Report, popular with traders and published during US Treasury Secretary Janet Yellen’s Asia visit.

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Yellen, who used her week-long trip to drum up support for a Group of Seven nations’ (G7) plan to impose a price cap on Russian oil, said she was “hopeful that China and India will see that observing a price cap would serve their own interests in lowering the price that they pay for Russian oil, they're important importers.”

“But even so, even if they don't observe the price cap, I think it's certain that many countries that import Russian oil will be affected by the insurance and financial services ban that the EU, and presumably the UK and US, will put into effect,” Yellen told reporters in Indonesia.

The G7 comprises of Canada, France, Germany, Italy, Japan, UK and US.

‘Pivot to the east’

Russia has managed to find customers for its discounted crude, more than half of which is now exported to Asia, according to the Federation’s third-largest oil producer Gazprom Neft.

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"When talking about the (western) embargo that will most likely happen, then the issue arises regarding redirecting our flows to Asia,” Gazprom Neft's chief executive Alexander Dyukov told the St. Petersburg International Economic Forum (SPIEF) last month.

“And there is the question of export infrastructure, such as pipelines, storage tanks, ports, tankers, and financial calculations. The process is already underway, with over 50% of the oil already being exported to Asia, whereas 75% was shipped to Europe at the beginning of the year," Dyukov reportedly told conference delegates on 17 June.

Earlier in June, Fitch Ratings warned that a European Union (EU) agreement to ban Russian seaborn exports of oil and oil products would “redirect trade flows and keep prices high, at least in the short term”.

Sales to energy guzzling Asia stood out in May, when Russia ousted Saudi Arabia as the biggest oil supplier to China, the world’s second-largest economy.

Crude oil is the Federation’s top export, accounting for $123bn of its export revenues, data for 2019 shows. Next on the list are refined petroleum products – things like petrol and diesel – at $66.2bn, gas at $26.3bn and coal at $17.6bn.

 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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