Asia will become the default market for Russian oil as the country tries to find buyers for its energy exports, said Dan Yergin, vice chairman of S&P Global.
Major oil importers in Asia like China and India have been pressured by oil prices which have soared since Russia invaded Ukraine in late February. Besides the appeal of cheaper Russian oil, both Beijing and New Delhi have close ties with Moscow.
Yergin told CNBC’s “Street Signs Asia” on Monday: “It does look like Asia would be the default market for barrels of Russian oil that would have normally gone to Europe.”
The West has punished Moscow for the invasion economically with the U.S. banning Russian crude, the U.K. planning to do the same and the European Union weighing similar measures.
Yergin added, “There’s a lot of self sanctioning that’s going on that’s simply people not picking up oil, banks not providing letters of credit, shippers not showing up and, indeed, people in some ports not receiving Russian oil.”
That leaves Russia with excess crude that is difficult to sell and that situation is likely to worsen, analysts said. Russia, part of the OPEC+ alliance, is the world’s largest exporter of oil to global markets and the second largest crude oil exporter behind Saudi Arabia, according to the International Energy Agency.
“I would have said five weeks ago Russia’s an energy superpower … I think it’s still going to be an important player. But it’s going to be a reduced energy power compared to where it was before,” Yergin said.
Earlier this month, the IEA said Russian crude is being sold at record discounts. A couple of commodity trading firms recently offered discounts of $30 and $25 per barrel for the Urals blend, according to analysts.
In contrast, prices for other countries’ energy exports have spiked to levels not seen in over a decade. Oil prices are around 80% higher than they were a year ago and have been volatile since the war began.
Traditionally, India gets its crude from Iraq, Saudi, Arabia, the United Arab Emirates and Nigeria – but they are all dictating higher prices right now as oil prices soar.
Industry observers have told CNBC that there’s been a significant” rise in Russian oil deliveries bound for India since early March after the Russia-Ukraine war began — and New Delhi looks set to buy even more cheap oil from Moscow.
“India, as you know, imports 85% of its oil, so it’s a real shock for the Indian economy when oil prices go up,” he said.
“India’s talking to Russia about buying oil at a considerable discount … but it’s a complicated logistical system that moves 100 million barrels a day of oil around the world and to rejigger that, it’s not going to go smoothly,” said Yergin.
Correction: This story was updated to reflect Dan Yergin is now vice chairman of S&P Global.
IMF hikes global growth forecast as inflation cools
The IMF has revised its global economic outlook upwards.
Norberto Duarte | Afp | Getty Images
The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.
In its latest economic update, the institution said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, it said that number would still mean a fall from an expansion of 3.4% in 2022.
It also revised its projection for 2024 down to 3.1%.
“Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research department at the IMF, said in a blog post.
The Fund turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the United States.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.
In addition, China announced the reopening of its economy after strict Covid-19 lockdowns, which is expected to contribute to higher global growth. A weaker U.S. dollar has also brightened the prospects for emerging countries that hold debt in foreign currency.
However, the picture isn’t totally positive. IMF Managing Director Kristalina Georgieva warned earlier this month that the economy was not as bad as some feared, “but less bad doesn’t quite yet mean good.”
“We have to be cautious,” she said during a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland.
The IMF on Monday warned of several factors that could deteriorate the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s invasion of Ukraine could shake energy and food costs even further; and markets could turn sour on worse-than-expected inflation prints.
IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022, but they still forecast an annual average rate of 6.6% in 2023 and of 4.3% in 2024.
As such, the Washington, D.C.-based institution said one of the main policy priorities is that central banks keep addressing the surge in consumer prices.
“Clear central bank communication and appropriate reactions to shifts in the data will help keep inflation expectations anchored and lessen wage and price pressures,” the IMF said in its latest report.
“Central banks’ balance sheets will need to be unwound carefully, amid market liquidity risks,” it added.
Most Adani shares continue losses; founder loses $28 billion in month
Gautam Adani, chairperson of Indian conglomerate Adani Group, at the World Congress of Accountants in Mumbai on Nov. 19, 2022. Founder Gautam Adani, the richest man in Asia and once second only to Elon Musk, fell out of the world’s top five richest to rank seventh on the Bloomberg’s Billionaire Index.
Indranil Mukherjee | Afp | Getty Images
Shares of most of Adani Group companies continued to see sharp losses for a third consecutive trading session as the company attempted to rebut short seller firm Hindenburg’s report, which accused the conglomerate of stock manipulation and an “accounting fraud scheme.”
Adani Enterprises erased earlier gains of up to 10% and last traded flat in Mumbai’s afternoon trade after the group published a lengthy response of over 400 pages to Hindenburg’s report over the weekend, saying that it will exercise its rights to “pursue remedies” to protect its investors “before all appropriate authorities.”
Adani Enterprises’ stock price remains more than 25% lower in the month to date, Refinitiv data showed. It proceeded with a secondary share sale worth $2.5 billion, which were overshadowed by a rout that wiped out a total of $48 billion as of last week’s close.
His net worth fell $27.9 billion year to date, the index showed. It peaked at $150 billion on Sept. 20, 2022, before falling to to $92.7 billion as of last week’s close, according to the index.
Despite small gains seen in Adani Enterprises, other affiliates of the Adani Group continued to plunge.
Adani Group said Hindenburg’s allegations were a “calculated attack on India, independence, integrity and quality of Indian institutions, and growth story and ambition of India,” in the response it released over the weekend.
The group’s chief financial officer Jugeshinder Singh said in an interview with CNBC-TV18, an affiliate of CNBC, that the value of Adani Enterprises has not changed “simply because” of share price volatility, adding it instead lies in its “ability to incubate new businesses.”
He added that he is confident Adani Enterprises‘ follow-on public offering will be fully subscribed, calling Hindenburg’s report “simply a lie” and the timing of the report “malicious.”
Hindenburg on Monday morning described the group’s response “bloated” and claimed it “ignores every key allegation” against the conglomerate that it raised.
“Fraud cannot be obfuscated by nationalism of a bloated response that ignores every key allegation we raised,” the short seller titled its response to Adani Group.
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