Russian oil revenues fall in November despite production boost

Russian oil revenues fell last month despite a boost in production to just below levels before the invasion of Ukraine, the International Energy Agency has said, in a sign that western efforts to choke off the Kremlin’s income are working.

The IEA estimated that Russia earned about $15.8bn (£12.8bn) from oil sales in November, the second lowest this year after $14.7bn in September.

The revenue fall came despite a rise in Russia’s exports of crude oil and products to 8.1m barrels a day, the highest level since April, two months after Russia invaded Ukraine.

It is a positive signal for western countries hoping to curb the Kremlin’s funding from energy exports, which represent Russia’s largest source of revenues.

The EU and G7 introduced a $60-a-barrel price cap on Russian seaborne oil on 5 December as governments sought to strike a balance between cutting the Kremlin’s revenues and keeping control of fuel price inflation. The price of non-Russian oil was about $81 a barrel on Wednesday.

Industry watchers have questioned how effective the cap will be because Russian oil is already trading below $60 a barrel. The IEA said the country’s export crude blend, Urals, slid to about $43 a barrel as of early December.

The cap, which led to a build-up of tankers off Turkey in its immediate aftermath of its introduction, restricted access to insurance and shipping services for any buyers of Russian oil that refuse to adhere to the threshold.

Russia’s president, Vladimir Putin, has claimed the cap will not have a significant impact on the country’s economy but could harm the international energy market and force Russia to cut production. His US counterpart, Joe Biden, was angered when the Opec+ oil cartel cut production to 2m barrels per day (bpd) in a decision led by Russia and Saudi Arabia in October.

The IEA predicts Russia’s oil output will fall by 1.4m barrels per day (bpd) next year.

“While lower oil prices come as a welcome relief to consumers faced by surging inflation, the full impact of embargoes on Russian crude and product supplies remains to be seen,” the agency said.

It added that global oil demand growth would slow next year but would still be at a robust 1.7% as China recovers from Covid-related economic restrictions.

It predicted China’s oil demandwould contract by 400,000 bpd to 15.4m this year before recovering by almost a million bpd in 2023.

The agency said global oil demand in 2022 had increased by 2.3m bpd compared with last year, and was predicted to rise by 1.7m next year to 101.6m bpd.