Portal partners
Russian giant benefits from the economy: Rosnieft dominated oil supply for China
Author:Mariusz Dasiewicz
Developments in world oil markets are conducive to the growth of Russian oil exports to the Chinese market. The Venezuelan crisis, anti-Iran sanctions, the PRC's US trade war, finally attempts by members of OPEC+ format – Russian exporters take advantage of convenient circumstances and enter China increasingly. Oil companies in Russia can talk about the hossie that has lasted for several years – even if it is made even more by Americans. In this case, Kremlin's hostility to Washington will not translate into a war in this area – too much for Moscow means great profits from the sale of "black gold" to risk actions to harm the shale sector in the US.
The Chinese administration announced trade data for 2018. It follows that Russia has strengthened the position of the main oil supplier to the PRC. Imports from Russia reached 7.04 million tonnes (1.658 million barrels a day) in December 2018 – this increase by 40% compared to the same month the year before. In 2018, Russian imports increased to 71.49 million tonnes, which is 19.7% more than in 2017. Moscow's main ally in global oil policy, or Saudi Arabia, also increased its supply to the Chinese market in 2018, but the difference in favor of Russia over a year doubled, to a level of 295 000 barrels per day. In 2018, Saudi Arabia provided China with 56.73 million tonnes, 8.7 percent more than in 2017.
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U.S. oil deliveries to China in December fell to zero – are to be resumed in March 2019. But in the whole of last year, imports of American oil by China increased by almost a quarter compared to 2017. The supply of oil from Venezuela in 2018 decreased by 24 percent, to 16.63 million tonnes (332 600 barrels a day). Reason? Deep crisis in Venezuela – investment shortages, poor management, workers' escape – which led to a decline in oil extraction. Iran's imports dropped by 20% over the whole year compared to 2017, to 29,274 million tonnes (585,375 barrels a day). This is primarily the effect of US sanctions. However, the increasing Russian position in the Chinese oil market is not only due to geopolitical reasons (Pekin had to limit imports from Iran and Venezuela). The increases arise, among others, from higher turnover in private Chinese refineries, which prefer the Russian oil class, such as ESPO. Another reason: Rosnieft's expansion policy on the Chinese market. The largest Russian oil company has signed new long-term contracts with Chinese state-owned ChemChina and PetroChina.
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The development of exports to China fits into the hossa in the Russian oil market. The current situation favours Russian exporters. Since 2017, Russia and OPEC have cut together oil production for the first time in order to raise the price of raw material worldwide. As a result, the price average went up from under $30 per barrel to a range of $60-85. But even more so, the US uses oil prices to increase, which are not part of a cartel cutting production. On the contrary, U.S. mining is going up sharply – the United States has already overtaken Russia and Saudi Arabia in this respect and has made the world's largest producer. This year, Americans are likely to break another record. In order to stop producing shale oil in the U.S., oil prices of up to $40 per barrel are needed. But this low price will not be conducive to the Russian economy either. Moscow will not go to a price war on the oil market with Americans. The increase in prices thanks to the cuts in OPEC+ mining gives Russia an additional billion dollars in revenue to the budget.
Source: Warsaw Institute.
