Outbound Russian oil supplies are still not showing signs of a sharp decline, as many analysts feared last month. In fact, crude oil supplies from Russia rose in the first full week of April to the highest level so far this year, the Bloomberg News tracker for crude oil leaving Russian ports showed on Monday. Yet a “buyer strike” in Europe with many large companies refusing to deal with Russian spot cargo is forcing Russian oil to make much longer and more complex journeys to reach willing buyers in Asia. While China and India are not afraid of Russian crude oil – which is sold at significant discounts, attracting price-sensitive buyers – logistics to deliver oil from Russian Black Sea and Baltic ports to Asia and the scarce availability of tankers, bank guarantees and insurance for Russia the cargo will limit the amount of oil Asia can take and make up for lost barrels that no longer go to Europe, analysts say.
Due to major changes in global trade routes to receive more Russian oil going to Asia, the region with the largest crude imports in the world will not be able to accommodate all the oil that Europe avoids.
Changes in trade routes are already taking place.
Some volumes previously intended for the West will be replaced by Asia, but not all, analysts say. This is due to the two-month trip to Asia (and the four-month round trip), which will require many supertankers that are not readily available on the global tanker market, said Zoltan Pozsar, global head of short-term interest rate strategy at Credit Suisse.
Related: How Egypt Could Become a Critical Energy Center Before the war, 1.3 million barrels a day of Russian oil were delivered from the Baltic ports of Primorsk and Ust-Luga to Europe by Aframax, and those trips to Hamburg or Rotterdam took a week or two. to complete, wrote Pozsar in a market commentary on March 31.
“If Russia now has to transport the same amount of oil not to Europe but to China, the first logistical problem it faces is that it cannot load the VLCC’s Urals in Primorsk or Ust-Luga because these ports are not deep enough to dock VLCC. “Russia will first have to sail Aframax ships to the port for STS transfer of crude oil (ship-to-ship) to VLCC,” said Pozar.
The transfer of the STS takes weeks, and once the transfer is complete, the VLCC will sail two months to the east, land and return to the Baltic Sea, which is another two months.
“Conservatively, Russian oil traveled for about a week or two before fueling economic activity (the time it takes for smaller Aframax carriers to travel from Primorsk to Hamburg) and will now have to travel for at least four months before boosting economic activity.” Suisse’s notes Pozar.
“What’s worse is that not only is the time to market worsening, but we are ultimately facing a shortage of ships and a corresponding jump in freight prices,” he added.
According to OPEC’s analysis in its latest Monthly Report on the Oil Market, published this week, “Tanker markets are heavily affected by the uncertainty surrounding the Eastern European conflict, which is expected to affect trading patterns.”
Related: The world’s largest oil trader will phase out Russian oil
“Aframax’s spot rates in the Mediterranean rose by more than 70% in March compared to January levels, while Suezmax’s spot rates in the Atlantic basin were about 50% higher over the same period. The power is filtered to the VLCC, improving general mood, “said OPEC.
The relocation of Russian barrels is very attractive to buyers such as China and India due to the large discounts of the Urals. But refineries in China and India are facing challenges to take on too much Russian crude oil in the short term due to contractual obligations with Middle Eastern producers, according to Wood Mackenzie.
In addition, China has not yet shown much appetite for Russian crude oil due to several factors, WoodMac said. These include expensive cargo for Russian cargo due to sanctions, payment challenges and tanker insurance, the fact that traveling in the Urals takes twice as long as Middle Eastern classes going to China, and long-term contracts of Chinese refineries with middle-class oil exporters. East.
Russia may still have willing buyers for its oil in developing Asia, and these buyers may not be interested in the ethics of buying Russian crude oil, but they will certainly care about tariffs and the availability of tankers and much longer travel.
By Tsvetana Paraskova for Oilprice.com
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