Research & Insights #37

Russian oil revenues surge according to IEA
In September, Russia earned US$18.8 billion from oil exports, the most profitable month since July 2022, according to the International Energy Agency (IEA). The country’s oil export revenues jumped by US$1.8 billion in one month. The agency attributes the increase in earnings to a combination of higher total export volumes and higher average prices for Russian crude oil and petroleum products. Russia’s total oil exports in September amounted to 7.6 million barrels per day (bpd), with China and India remaining the biggest buyers. The IEA’s estimates for Russian exports are surprising, as the country has been intent on cutting oil output and deliveries. Russia and Saudi Arabia, the world’s leading oil exporters, announced that they would continue to cut crude production until January 2024. Futures contracts for Brent crude oil, the global benchmark, climbed to around US$95 a barrel in September, from a year’s low of around US$72 in March.

IMF upgrades Russia’s GDP growth for 2023
The International Monetary Fund (IMF) has adjusted its outlook for economic growth in Russia, raising its projections for 2023 and lowering them for 2024, according to the World Economic Outlook report. The IMF is currently forecasting Russian GDP growth of 2.2% in 2023 and 1.1% in 2024. The IMF’s outlook for 2023 has been upgraded by 0.7 percentage points compared to July and by 1.5 percentage points compared to April, according to the report. “The rise in growth reflects a substantial fiscal stimulus, strong investment, and resilient consumption in the context of a tight labor market,” according to the IMF. In addition, Russia’s GDP growth forecasts for 2024 have been revised downwards by 0.2 percentage points compared to the July and April forecasts. Moreover, the IMF projects inflation in Russia at 5.3% in 2023, down from 13.8% in 2022, while in 2024 it expects inflation to grow again to 6.3%.

Gold goes where the money is, eastwards
Gold purchases by central banks, particularly in non-Western countries, continue into 2023. Central banks increased their gold reserves by 378 tonnes from January to June. China made the largest purchases, followed by Singapore, Poland, India and the Czech Republic. The East is not only stockpiling gold and mining it on a massive scale – China and Russia are in the world’s top three gold-producing countries – it is also developing its own gold-trading infrastructure, particularly China, the United Arab Emirates and Russia, with the aim of reducing dependence on Western gold-trading centres such as London, New York and Zurich. In March 2022, the LBMA, the London-based association known for setting the international reference price for gold, suspended the Good Delivery status of Russian refineries. Three Russian banks – VTB, Otkritie and Sovcombank – also lost their association membership.

Major gas supplier issues warning to EU
Even though the European Union’s storage facilities are almost full, the EU’s natural gas market will remain turbulent over the coming winter, Norwegian energy giant Equinor has warned. EU gas reserves reached 97.89% capacity, exceeding the 90% target set by the European Union for 01 November. However, expectations of increased competition with Asia for LNG could push prices up, Equinor CEO Anders Opedal told the Energy Intelligence Forum in London. Following the reduction in gas purchases from Russia last year, the EU increased its LNG imports and redoubled its efforts to reduce consumption in the Union, particularly in industry. LNG became the main source of gas for the bloc, accounting for up to 35% of total imports. To offset gas supply shortfalls, the EU has resorted to taking in high-priced shipments of LNG from the US and Qatar, and increased pipeline imports from Norway and Azerbaijan. 

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