Analysis: How the Ukraine conflict is reshaping global oil markets

The model of the gasoline pump is seen in front of the colors of the flag of Ukraine and Russia in this illustration taken on 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 in May: Kpler
  • Russian oil exports return to pre-invasion levels: IEA
  • The price of some grades of Nigerian crude reached peaks due to European demand

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

The deviations mark the biggest supply-side shock to global oil trade since the US shale revolution altered the shape of the market about a decade ago and suggest Russia will be able to get around a European Union oil ban ( 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 avoided, to customers in India and China who are picking up oil. shipments at a deep discount, according to industry and trader data. 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 have stabilized around $110 after hitting a 14-year high for above $139 a barrel in March.

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

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

A complex patchwork of US, EU and British sanctions has barred Russian-owned or -flagged ships from calling at ports, meaning some of the increased trade with Asia is facilitated through the transfer from ship to ship at sea, a costly process in which the risk of spills is greater.

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

Ship-to-ship transfers, which make up a small fraction of total seaborne trade, have been moved away 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 Baltic Sea entry point,” Petro-Logistics chairman Mark Gerber told Reuters. “That is no longer happening; hence the STS trend from sanctioned tanker to non-sanctioned tanker is increasing in the warmer, friendlier waters of the Mediterranean.”

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

In January, before the invasion, about 1.5 million bpd were shipped directly to Asia.

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

The volumes transported by sea are 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 the pre-invasion rate.

CRUDE FROM WEST AFRICA

To make up for the loss of Russian oil, European refiners have turned to West African crude imports, which rose 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, will arrive in northwest Europe in May, with three Amenam cargoes from Nigeria compared to one in February.

Meanwhile, West African crude volumes to India have almost halved, according to Gerber, with 280,000 bpd delivered in April from 510,000 bpd in March as Delhi switches to Russian supply.

With European demand red-hot, prices for light, sweet Nigerian crude grades in particular are hitting record highs, according to traders, with Forcados crude, for example, offered at a premium of at least $7 to Brent. .

Supply from North Africa to Europe is up 30% since March, Petro-Logistics said. Of this, the Eikon data indicates that arrivals in northwest Europe from Egypt’s Sidi Kerir port, which analysts say is likely to be Saudi crude, will almost double compared to March to more than 400,000 bpd in May.

The United States has also increased supplies to Europe. European crude oil imports in May from the US on a delivery basis rose more than 15% compared to March, according to tracking firm Kpler, the highest monthly pace on their records. Europe has offloaded about 1.45 million bpd of crude from the United States.

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Additional reporting by Jonathan Saul, edited by Carmel Crimmins

Our standards: the Thomson Reuters Trust Principles.

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