Asia is becoming the default market for Russian oil as the country tries to find buyers for its energy exports, said Dan Yergin, vice chairman of S&P Global.
Big oil importers in Asia like China and India have been squeezed by oil prices, which have soared since Russia invaded Ukraine in late February. Aside from the appeal of cheaper Russian oil, both Beijing and New Delhi have close ties with Moscow.
Yergin told CNBC’s Street Signs Asia on Monday, “It looks like Asia is the default market for barrels of Russian oil that would normally have gone to Europe.”
The West has economically punished Moscow for the invasion, with the US banning Russian crude oil, the UK planning to do the same, and the European Union considering similar measures.
Yergin added, “There are a lot of self-sanctions that are simply people not picking up oil, banks not issuing letters of credit, shippers not showing up and actually people in some ports not receiving Russian oil.”
I would have said five weeks ago Russia is an energy superpower… I think it will still be a major player. But it will be a reduced energy force compared to before.
This leaves Russia with excess crude that is difficult to sell, and that situation is likely to worsen, analysts said. Russia, part of the OPEC+ alliance, is the world’s top exporter of oil to global markets and the second-biggest exporter of crude oil behind Saudi Arabia, according to the International Energy Agency.
“I would have said five weeks ago that Russia is an energy superpower… I think it will still be a major player. But it will be reduced energy power compared to before,” Yergin said.
Earlier this month, the IEA said Russian crude is selling at record discounts. Some commodity trading firms recently offered rebates of $30 and $25 per barrel for the Urals blend, according to analysts.
In contrast, other countries’ energy export prices have risen to levels not seen in over a decade. Oil prices are around 80% higher than 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, the United Arab Emirates and Nigeria – but they are all dictating higher prices right now as oil prices soar.
Industry observers have told CNBC that there has been a sharp surge in Russian oil supplies to India since early March following the start of the Russo-Ukrainian war – and New Delhi seems poised to buy even more cheap oil from Moscow.
“As you know, India imports 85% of its oil, so when oil prices go up, it’s a real shock to the Indian economy,” he said.
“India is talking to Russia about buying oil at a significant discount…but it’s a complicated logistics system moving 100 million barrels of oil a day around the world, and to make up for that, it’s not going to go smoothly,” Yergin said .
Correction: This story has been updated to show that Dan Yergin is now Vice Chairman of S&P Global.