What's going on?
The International Energy Agency (IEA) released a report on Wednesday estimating that Russian oil exports dropped off last month.
What does this mean?
Ever since Russia’s invasion of Ukraine, Europe – by far the country’s biggest oil export market – has gradually been phasing out its oil. And while the Middle East and elsewhere are still buying the country’s slippery elixir, they haven’t been taking enough to make up for Europe’s principled stand: the IEA estimates that Russian daily exports fell by 250,000 barrels in June.
But Russia has had one saving grace: the price of oil averaged $117 a barrel last month, as global supplies continued to fail to keep up with a post-pandemic rebound in demand. So even though Russia exported far less of the dusky earth juice, the value of its oil exports still rose by $700 million to over $20 billion in June (tweet this).
Why should I care?
The bigger picture: More demand, please.
Oil’s higher price is already impacting demand for the commodity by more than the IEA first thought, which might be why the agency has lowered its estimates for global demand. It now thinks demand will overtake pre-Covid levels next year rather than this one, and also warned that faltering demand poses a real risk to the global recovery – not to mention the economic stability of emerging economies.
Zooming out: It’s up to the governments.
The US is urging Middle Eastern producers to help boost supply, but it’s not quite that simple: Saudi Arabia and the UAE only have the capacity to increase their daily output by 2.2 million barrels a day. That might sound like a lot, but the world gets through about 4 million an hour. So the IEA is recommending governments create their own policies to limit energy use, in a bid to keep their economies on track.