Russian oil finds few buyers, even at deep discounts

HOUSTON — The United States and the European Union have been unwilling to impose sanctions on Russian energy exports in response to the ...


HOUSTON — The United States and the European Union have been unwilling to impose sanctions on Russian energy exports in response to the country’s invasion of Ukraine. But some oil traders seem to have concluded that buying oil from Russia just isn’t worth it.

One of the top three oil producers in the world, after the United States and Saudi Arabia, Russia provides around 10% of the world’s supply. But in recent days, European traders and refineries have sharply reduced their purchases of Russian oil. Some have stopped completely.

Buyers are pulling out because they or the shipping lines, banks and insurance companies they use are worried about breaching Western sanctions in place now or those that may come later, experts said. energy. Others are worried about the shipments being hit by missiles, and some just don’t want to risk being seen as funding the government of President Vladimir V. Putin.

Russian exporters have been offering the country’s highest quality oil at a price of up to $20 a barrel in recent days, but have found few buyers, analysts said. Buyers, particularly in Europe, have turned to oil from the Middle East, a move that helped push the global oil price above $100 a barrel for the first time since 2014.

“The enablers of oil exports – banks, insurance companies, tankers and even multinational oil companies – have enacted what amounts to a de facto ban,” said Tom Kloza, global head of oil. energy analysis at the Oil Price Information Service. Mr Kloza said it could be weeks before anyone knows how much Russia’s oil exports have fallen and whether the decline will continue, but “it is clear that Russia’s contribution to the world’s oil supply has been restricted”.

On Tuesday, the International Energy Agency said its members, including the United States and more than a dozen European countries, had agreed to release 60 million barrels of oil from their strategic reserves. The announcement had little impact on global oil prices, likely because the amount was modest, amounting to about three days of US consumption. The White House and the Energy Department signaled that more oil could be released later, describing the IEA deal as an “initial release.”

Much of Russia’s oil is shipped from Black Sea ports for use in Europe. Some shipping companies carrying oil and commercial cargo fear that their ships will be shot at. The congestion of the sea lanes interrupts the transport not only of oil but also of food. On Friday, an unidentified missile hit a Moldovan-flagged tanker carrying oil and diesel.

“Russia’s flagship blend, the Urals, was one of the first to cross $100 a barrel this year,” said Louise Dickson, senior oil market analyst at research firm Rystad Energy. and advice. “But the country’s foray into Ukraine has made it one of the most toxic barrels on the market.”

As European refiners buy more oil from places like Saudi Arabia, Russian companies are increasingly trying to sell their crude to refineries in China and other Asian countries by offering them discounts.

Most of Russia’s roughly five million barrels of daily oil exports are destined for Europe. About 700,000 barrels per day are consumed in the United States, or about 4% of the American market.

Several Scandinavian refiners, including Finland’s Neste Oyj and Sweden’s Preem, said they had halted purchases of Russian oil.

“Due to the current situation and the uncertainty in the market, Neste has mainly replaced Russian crude oil with other crudes, such as North Sea oil,” said Theodore Rolfvondenbaumen, a spokesman for the company. Nest. As the company monitors future sanctions and “potential counter-sanctions”, he said, it is preparing “for various sourcing, production and logistics options”.

Energy experts say the international oil trade could be revived in a way similar to what happened in 1956 when Britain, France and Israel attacked Egypt and closed the Suez Canal. For a time, tankers were diverted around Africa. Likewise, in the coming months, Russian oil once shipped to Europe could go to China.

“Compromise could take six to eight weeks,” said Michael Lynch, president of Strategic Energy and Economic Research, who is an occasional adviser to the Organization of the Petroleum Exporting Countries. “For a week or two things could be disrupted.”

Mr Lynch said the decision by European buyers to move away from Russian oil would give China and its President, Xi Jinping, more sway and influence in the energy market and with Mr. Putin.

“If China wants to, it can use the power of its purse to either humiliate Putin by denying him a client or elevate him by bailing him out financially,” he said.

While Western countries have imposed harsh sanctions on Russian banks and Mr. Putin’s wealthy allies, they have left Russia’s oil industry alone so as not to cut off global supplies and further fuel inflation.

As fighting in Ukraine intensified this week and hopes for a negotiated settlement faded, global and US oil prices surged. The market was already tight before the crisis, as demand increased as coronavirus cases declined, allowing consumers and businesses to return to normal.

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Newsrust - US Top News: Russian oil finds few buyers, even at deep discounts
Russian oil finds few buyers, even at deep discounts
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