What's the situation? Russian oil exports to China and India plunge 30% in the last four weeks

In order to recover the losses lost to the European market, Russian oil companies have encountered increasing difficulties
in trying to sell oil to Asia.
Now, Russia's lost energy market in Europe will be difficult to make up
for in Asia.
After the end of oil prices temporarily entering the pullback channel, it will deal a serious blow
to Russia's fiscal revenue.

The number of Russian oil purchases by China and India fell by 30% since June

The Moscow Times reported at 6 p.
m.
on July 19 that Russian oil deliveries to India and China fell for the fourth consecutive week, down nearly 30 percent
from the peak reached in May.

According to vessel tracking data compiled by Bloomberg (using a four-week moving average), all Russian ports supplied oil to China and India slightly more than 2 million bpd in May and early June
.
The highest shipment for the week of May 27 was 2.
05 million barrels per
day.

But in the week to July 15, oil purchases in China and India had fallen to 1.
46 million barrels
.
Daily sales were 28.
8% lower than in the week at the end of May
.

In the past four weeks to July 15, Russia delivered an average of 784,000 barrels per day to China and 679,000 barrels
to India.
This was down 33.
6 percent and 19.
2 percent, respectively, from 1.
18 million barrels and
840,000 barrels in the four weeks from late May to early June.

From the second half of April to mid-June, the cumulative deliveries of Russian tankers were high, exceeding 3.
5 million barrels per day.

But then it began to decline and went down
for 4 consecutive weeks.
In the past month, they have lost 467,000 barrels, down 13%.

Second, why did China and India significantly reduce the purchase volume of Russian oil after significantly increasing the amount of Russian oil procurement in March and May?

Russia's crude oil sales have fallen in recent weeks, mainly due to reduced purchases by Asian buyers, of course, India and China
.
China and India accounted for 55-56%
of Russian oil exports in the past six weeks.

Why did China and India increase their purchases of Russian crude oil in March-May, and then significantly reduce their purchases of Russian crude oil since June? We speculate that this may be influenced
by crude oil price expectations.

In June, China's total oil imports were 35.
82 million tons, a sharp decrease of 21.
8%
from 45.
82 million tons in May.
In May, it increased by 6.
5% from 43.
03 million tons in April; April was up 0.
7% from 42.
71 million mt in March and 17.
5%
in March from 36.
34 million mt in February.
This shows that China has not only reduced the amount of oil imported from Russia, but also reduced the amount
of crude oil purchased from other import channels.

If we look at the Brent crude oil market, we will find that the price of crude oil has fallen all the way after reaching a peak of $120 / barrel in the first week of June, and fell to a minimum of $105 around June 25, a decline of 12.
5%.

Countries entering a cycle of interest rate hikes will greatly affect consumption expectations, which will lead to a period of economic contraction, bearish on energy and commodity needs, resulting in lower
prices.
Of course, crude oil procurement agencies in China and the United Kingdom will also study and judge the trend
of energy prices.
Crude oil prices were bullish in March-May, and efforts were made to purchase Russian Urals oil
, which was 2-30% cheaper than Brent.
It would have been foolish to see the end of the energy price increase cycle since the second week of June, to begin a downward cycle, and to continue to purchase crude oil at full capacity
.

Third, the world's oil supply pattern is changing dramatically, and Russia's lost European energy market may not be able to make up for it from Asia
.

Since June, China and India have reduced crude oil orders from Russia, sending a clear signal to Russia that the increase in Russian oil purchases between March and May is purely a commercial activity
.
Once oil prices fluctuate, or there are more favorable procurement channels to replace, orders from China and India will be cancelled or transferred
at any time.

After Biden's July 15-16 trip to the Middle East, Saudi Arabia has pledged to lead OPEC to increase oil production to support the global oil market balance and achieve sustained economic growth
.

Iran has also pulled oil supplies
with Russia.
According to Bloomberg reported on July 3, as its most important ally, Russia, is increasingly consolidating its position in the Sino-Indian market, Iran has decided to further reduce the price of its already cheap crude oil in order to compete with Russia in the Sino-Indian energy market
.

Data from commodity data analysis company Kpler shows that in March and May, Russian Urals crude oil has replaced a part of Iranian crude oil in China's oil
import data.
The price of Iranian crude oil, while nearly $10 per barrel lower than Brent crude futures, is $10 more expensive than the price at which Urals delivered to China
.
This forced Iran to decide to further reduce oil prices and regain its market share
from the Russians.

And Kazakhstan, Azerbaijan, Georgia, Israel, Africa and other oil-producing countries are making a fortune in silence, quietly seizing the European energy market after Russia's withdrawal, and they have obtained a lot of long-term energy supply orders
from Europe.
Kazakhstan has already torn its skin for this and openly tore
with Russia.

Europe's ultimatum is to completely abandon the purchase of Russian oil
from December 5 this year.
The share of the European market in Russian oil exports has fallen to about
30% in June, from around 45% in 2021.

Fourth, the shrinking oil market and the decline in oil prices will deal a serious blow
to Russia's fiscal budget.

After Russia launched the Russo-Ukrainian War on February 24, severe economic sanctions in Europe and the United States have already hit Russia's domestic manufacturing and service industries
.
Russia's post-war budget is supported by energy revenues
.
By mid-April, dollar revenues from Russian oil exports had increased by 25 percent compared to pre-war levels, but then fell by the same amount
from their peak.
In the week ended July 15, they reached $168 million, nearly 30%
less than the peak of $238 million in the week of April 22.

And the ruble exchange rate controlled by the Central Bank of Russia has also dealt a blow
to oil revenues.
The ruble-dollar exchange rate on February 18 was 87.
55, compared to 57.
96 on July 15, so the Russian government suffered a huge loss
of revenue on exchange rate differences.
In the week before the war, export duties brought her 11.
294 billion rubles, and in mid-July - only 9.
737 billion rubles, that is, a decrease of 13.
8%.

If the ruble exchange rate remains unchanged at 87.
55 on February 18, income for the week of mid-July should be 12.
678 billion rubles, an increase of 12.
3%.

If, by December 5, Europe withdraws from Russia's oil export channels and Europe's remaining 30% market share cannot find a replacement, Russia's oil revenues will continue to decline by at least 30%.

Crucially, economists expect Brent prices to fall to around $90 in the fourth quarter from around $105 in early July, and Russia's oil revenues will shrink by about
15% after losing the remaining 30% of the European market.
Neutral forecasts are that Russia's oil revenues in December will be 50% lower than in May, oil revenues in the first quarter of next year will be 55% lower than in the second quarter of this year, and oil revenues for the whole of next year will be 60%
lower than in 2022.