Analysis: How the conflict in Ukraine is reshaping global oil markets


A model of a petrol pump is seen in front of the colors of the Ukrainian and Russian flag in this illustration taken March 25, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

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  • Russian maritime exports to Asia reach 2.3 mbpd – Petro-Logistics
  • US crude discharges in Europe hit record high in May – Kpler
  • Russian oil exports return to pre-invasion levels – IEA
  • The price of some grades of Nigerian crude hits highs on European demand

LONDON, May 30 (Reuters) – Russia’s invasion of Ukraine has reconfigured the global oil market, with African suppliers stepping in to meet European demand and Moscow, stung by Western sanctions, increasingly exploiting risky ship-to-ship transfers to get its crude to Asia.

The reroutings mark the biggest shake-up to the supply side of global oil trade since America’s shale revolution altered the shape of the market about a decade ago and suggest Russia will be able to navigate a ban oil from the European Union (EU), provided that Asia and China continue to buy its crude.

Sanctions imposed on Moscow after the conflict in Ukraine began in February, including a US ban on its oil imports, have prompted Russia to turn away from Europe, where its crude is shunned, to customers in India and in China picking up cargo at a steep discount, according to industry data and traders. Read more

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Russian exports returned to pre-invasion levels in April, according to data from the Paris-based International Energy Agency and oil prices stabilized around $110 after hitting a 14-year high. years above $139 a barrel in March.

Even if the EU agrees to an oil ban in its next round of Russian sanctions, analysts said the impact could be tempered by demand from Asia.

“Unless the West exerts diplomatic pressure on Asian buyers, we don’t see the supply gap widening and oil prices skyrocketing,” Julius Baer’s Norbert Rücker said.

A complex patchwork of US, EU and UK sanctions has banned Russian-owned or Russian-flagged ships from calling at ports, meaning some of the increased trade to Asia is facilitated by the ship-to-ship transfer at sea – an expensive process where the risk of spillage is greater.

Overall, the flow of Russian oil to Asia via sea has jumped at least 50% since the start of the year, according to tanker-tracker Petro-Logistics and other data.

Ship-to-ship transfers, which represent a small fraction of overall maritime trade, have shifted from the Danish coast to the Mediterranean Sea to avoid sanctions and protests.

“Ship-to-ship (STS) transfers were common in Danish waters at the entry point to the Baltic Sea,” Petro-Logistics chairman Mark Gerber told Reuters. “That no longer happens; hence the STS trend from sanctioned tanker to non-sanctioned tanker which is increasing in warmer, friendlier Mediterranean waters.”

Gerber estimated the volumes of Russian crude and products transferred between tankers in the Mediterranean at around 400,000 barrels per day (bpd), the majority of which goes to Asia, in addition to the 2.3 million bpd going directly.

In January, before the invasion, about 1.5 million bpd was sent directly to Asia.

Russian oil is loaded onto Aframax or Suezmax tankers that carry less than 1 million barrels and is transferred at sea to larger vessels that can carry 2 million barrels, making transportation more profitable, traders say .

Maritime volumes represent only a part of Russia’s total exports. Including pipeline supplies, total Russian crude and product exports rose to just over 8 million bpd in April, returning to pre-invasion rates.

WEST AFRICAN CRUDE

To compensate for the loss of Russian oil, European refiners have turned to imports of West African crude, up 17% in April compared to the 2018-2021 average according to Petro-Logistics.

Eikon data also shows an increase and indicates that 660,000 bpd, mainly from Nigeria, Angola and Cameroon, arrived in northwestern Europe in May, with three shipments of Nigerian Amenam against one in February.

West African crude volumes to India, meanwhile, nearly halved, according to Gerber, with 280,000 bpd delivered in April from 510,000 bpd in March, as Delhi shifts to Russian supply.

With European demand scorching, prices for Nigerian light and sweet crude grades in particular are at record highs, traders say, with Forcados crude for example offered at a premium of at least $7 over Brent.

Supply from North Africa to Europe has increased by 30% since March, Petro-Logistics said. Of that total, Eikon data indicates that arrivals to northwestern Europe from the Egyptian port of Sidi Kerir, which analysts say is likely Saudi crude, will nearly double from March for exceed 400,000 bpd in May.

The United States has also boosted supplies to Europe. European crude imports from the United States in May on a delivered basis are up more than 15% from March, according to tracking firm Kpler, the highest monthly pace on its record. Europe rejected about 1.45 million bpd of US crude.

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Additional reporting by Jonathan Saul, editing by Carmel Crimmins

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