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Ukraine conflict redraws world crude oil map

Since the Ukraine crisis broke out, Russian oil that once flowed into Europe has been transferred to Asia, while the continent has increased its purchases from Africa and the United States.

The Ukraine crisis has reshaped the global oil market. Accordingly, African suppliers stepped in to meet European demand. Meanwhile, Moscow, affected by Western sanctions, is increasingly exploiting shipping operations by ship – although it is fraught with risks – to Asia.

The changes mark the biggest supply-side upheaval to world oil flows since a decade ago, when the US shale revolution reshaped the market. What is happening also suggests that Russia will be able to adjust to the European Union’s oil ban, provided that Asia and China continue to buy.

By April, world oil prices had stabilized around $110 per barrel after hitting a 14-year high above $139 in March. Russian oil was banned from imports by the US and shunned by European businesses, but shunned by India. India and China increase purchases with high discounts. The flow of Russian oil to Asia by sea has increased by at least 50% since the start of the year, according to tanker tracking company Petro-Logistics and several other data sources.

According to analysts, even if the EU agrees to impose a ban on Russian oil in the next round of sanctions, Moscow will still be somewhat affected by demand from Asia. “Unless the West puts diplomatic pressure on Asian buyers, we don’t see the possibility of a widening of the supply gap and a spike in oil prices,” said Norbert Rücker, chief economist at Julius Baer bank (Switzerland) Si), reviews.

Graphic of a gas pump with the background of the Ukrainian flag (left) and the Russian flag (right).  Photo: Reuters

Graphic of a gas pump with the background of the Ukrainian flag (left) and the Russian flag (right). Photo: Reuters

Sanctions from the US, EU and UK have banned Russian-owned or flag-flagged vessels from calling ports to divert oil to Asia by transferring oil directly from one vessel to another, although the process makes it difficult The shipping is more expensive.

Specifically, Russian oil is loaded on Aframax or Suezmax tankers with a carrying capacity of less than one million barrels. These ships deliver directly at sea to larger vessels that can carry 2 million barrels.

“Transfers of oil between ships used to be common in Danish waters, at the entry point of the Baltic Sea, but now no longer. This activity tends to increase in the warmer and friendlier Mediterranean waters of the Mediterranean Sea. “, said Petro-Logistics President Mark Gerber.

According to Gerber, the volume of Russian crude oil and related products transferred between tankers in the Mediterranean is about 400,000 barrels per day. Most of that goes to Asia, with 2.3 million barrels shipped directly to this market every day. In January, only about 1.5 million barrels of Russian oil were sent directly to Asia per day.

Sea freight volumes are only a fraction of total exports from Russia. Including pipeline supply, Russia’s total crude oil exports rose to over 8 million barrels per day in April, recovering to pre-Ukraine crisis levels.

Meanwhile, the West increased its purchases of African oil. To make up for the loss of Russian oil, European refiners turned to imports of West African crude, up 17% in April from the 2018-2021 average, according to Petro-Logistics. Eikon data estimates that about 660,000 barrels of oil per day – mainly from Nigeria, Angola and Cameroon – were shipped to Northwestern Europe in May.

Meanwhile, according to Mr. Mark Gerber, West African crude exports to India have nearly halved, to just 280,000 bpd delivered in April, from 510,000 bpd in March, due to Delhi’s switch to buy Russian oil.

According to traders, with European demand heating up, the price of Nigerian light sweet crude oil in particular is reaching a record high. For example, the country’s Forcados crude is offered at least $7 higher than Brent.

Supply from North African oil to Europe has also increased by 30% since March. Among these, the volume to Northwest Europe from the port of Sidi Kerir (Egypt), likely Saudi Arabia’s oil, has nearly doubled. double from March, to above 400,000 barrels per day in May.

Along with that, the US has also increased oil supplies to Europe. According to data tracking company Kpler, Europe’s crude oil imports in May from the US increased by more than 15% compared with March. Europe currently receives about 1.45 million barrels of crude oil per day from the US.

Session An (according to Reuters)

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