Putin’s army is consuming gas and Russians are stuck on vacation at home, pushing the country’s oil production to its highest level in 5 months

• Russian oil production hit its highest level since February as the military burns gas and people vacation at home, according to data firm Kpler.

• The boom in domestic demand has seen exports to Asia fall 40% from their wartime peak, the data shows.

• “Russians can barely fly anywhere, so they travel all over the country,” Kpler analyst Viktor Katona told Insider.

According to energy consultancy Kpler, a gas-guzzling military and a summer driving boom are increasing domestic demand for oil in Russia and driving a sharp drop in exports to Asia.

Russian oil production stood at around 10.8 million barrels a day in July, according to data shared with Insider by Kpler – the highest level since Russia invaded Ukraine in late February.

Production initially fell from 11 million barrels a day in February to 10 million in April as the war and resulting sanctions rattled the Russian economy. However, India and China have rapidly increased their purchases of the country’s rough, which is trading at a discount in international markets.

A looming European Union ban on Russian oil imports is expected to cut its production by more than a million barrels a day by the end of 2022, analysts say.

Currently, however, a rebound in domestic demand has helped Russian output climb for the third month in a row.

Many Russian airlines have been banned from flying over Europe, severely limiting vacations abroad for residents of the sanctioned country. According to Viktor Katona, an analyst at Kpler, this has led to an explosion in home travel, which has sent demand for fuel and kerosene skyrocketing.

“There’s just incredibly strong domestic demand,” Katona told Insider. “Russians can hardly fly anywhere, so they travel all over the country.”

Katona said Russia’s war machine – now in its fifth month of a brutal war in Ukraine – is also pushing up domestic consumption.

“Every tank, every plane – you name it, all military equipment runs on diesel, effectively,” Katona said.

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A May report from S&P Global Commodities Insights estimated that the invasion could consume nearly 6% of diesel coming out of Russian refineries.

Kpler said the jump in local demand led to a sharp decline in exports, especially to Asia. State subsidies also encourage energy companies to keep their oil in the country, Katona said.

Russia’s crude oil exports to Asia peaked at 2.2 million barrels a day in April, but fell about 36% to around 1.4 million barrels in July, Kpler data shows. .

Indian imports of Russian crude peaked at 950,000 barrels a day in April but fell to around 660,000 this month. China hit 1.2 million barrels a day in May, but has since fallen to around 740,000.

Signs of a slowing global economy have pushed oil prices lower in recent weeks as traders anticipate lower demand. China’s overall crude imports have already fallen as its economy struggles under a strict zero-COVID policy.

Still, Katona said Russia should have no problem restarting exports to Asia once the festive season is over. Russian oil is becoming cheap, making it attractive to countries facing rising prices, such as India.

“It’s a no-brainer,” Katona said. “If you have massive inflation, the best you can do is reduce your cost of energy.”

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