The Oxford Business Group (OBG) has indicated that emerging market manufacturers are prepared to acquire higher shares of a developing market as a result of the EU’s planned bans on the export of Russian oil and oil-related products this year in reaction to Russia’s ongoing war in Ukraine.
Following restrictions on the shipment of Russian crude oil by sea that went into effect in December, the EU this month began imposing restrictions on Russian oil products like diesel.
Timipre Sylva, the minister of state for petroleum, stated at the Gastech conference in Milan, Italy, last year that the nation was positioned to become a significant gas provider to Europe in the wake of the current energy crisis between Russia and Ukraine.
He confirmed that: “Today we are seeing gas being weaponised and every country will at least require some alternative supply. So, we are positioning ourselves to be an alternative supplier to Europe. We are already working with Algeria to build the Trans-Sahara Gas Pipeline that is going to take our gas all the way to Europe.
“We are also having a partnership with Morocco to extend the West Africa Gas Pipeline to Morocco and across the Mediterranean to Europe.
“We believe that Europe needs this gas and it is a win-win for all of us and it is in their interest to reduce these discriminatory investments that their banks are doing.”
CEO of France’s TotalEnergies Patrick Pouyanné, last week, said there is “no longer a unified oil market… With all these bans, we are creating a grey market for oil.”
While this “grey” market may not be ideal for European international oil companies like TotalEnergies that still have investments in Russia, emerging markets oil producers in the Middle East, Latin America, and Africa are increasingly finding outlets for their rising levels of production as the markets rebalance. This is due to their geography, geopolitics, and the crude grade and oil products that they export.
The OBG claims that nations like Nigeria, which has historically exported goods to Europe and the Americas, might also have a bigger impact.
Mele Kyari, group chief executive of Nigerian National Petroleum Company Limited, reported last Friday that the company’s monthly output had increased to 1.6 million barrels per day from less than one million in July of last year, when the nation’s exports had fallen to their lowest levels in 25 years as a result of oil theft.
Kyari recently attributed the decline in crude oil production to theft that resulted from oil pipeline vandalism.
The Organization of the Petroleum Exporting Countries’ Monthly Oil Market Report for January, which revealed that Nigeria’s oil rig count had been increasing over the previous 12 months, preceded the NBS report.
The number of oil rigs in Nigeria has now risen to 13, its highest number since January 2020. Nigeria had 16 oil rigs as of the year 2019. In 2020, it dropped to 11, and by the fourth quarter of 2021, it had fallen to seven.
It rose to eight by the first quarter of 2022, then to ten by the second quarter, to eleven by July 2022, and finally to nine by the third quarter of 2022. Yet, it had been steadily increasing ever since the fourth quarter of previous year.
Similarly, the Nigerian Bureau of Statistics (NBS) reported in its most recent report that Nigeria’s average oil output decreased to 1.3 million barrels per day in the fourth quarter from 1.5 million bpd in the same quarter of 2016.
As the EU announced the restriction in May of last year, the market had time to prepare for the ban’s implementation in December, according to the OBG.
The Sverdrup field in Norway added 340,000 barrels per day (bpd) of medium sour grade crude in 2022, which is comparable to the sour Urals crude that the EU prohibited from Russia. This was the highest incremental increase in crude imports.
Another significant increase came from the US, whose export volumes rose by 52.2% between January and September 2022 and by about 1.7 million barrels per day in December, the highest level in more in two years.
The US is expected to produce a record 9.4 million barrels per day in March, up 75,000 barrels from February. Due to the slowdown in the US economy, more usage of electric vehicles, and improved fuel efficiency, domestic demand fell in 2022, allowing for increased export supply.
Saudi Arabia contributed the most among emerging markets, boosting its direct seaborne shipments to the EU by 126%, from 4.6 million tonnes in 2021 to 10.3 million tonnes in 2022. Low-sulfur, diesel-rich petroleum from the nation satisfies the demand and grade standards set by the EU for both crude oil and oil-derived goods.
For a very long time, the Kingdom was the main exporter of crude oil via sea. The total exports from the Gulf that year increased 12.7% to 879.3 million tonnes, accounting for 42.9% of the world’s seaborne crude oil trade. In 2022, its outgoing seaborne shipments increased by 17.2% to 362.8 million tonnes.
Yet, just 10.7% of all Saudi exports were sent to Europe. Since Saudi Arabia is eager to preserve its market share in Asia and compete with Russia, the majority of its shipments that year went to Asia, with the nation recording export gains of 14.2% to Japan, 17% to South Korea, 19.2% to India, and 35% to ASEAN nations.
Furthermore increasing 10.3% to 218.5 million tonnes in 2022, Russia shipped record volumes of goods at reduced costs to nations including Turkey, China, and India. Nevertheless, US exports increased by 22.3% to 164.3 million tonnes.
