- Global oil flows are changing ahead of the coming embargo on Russian oil, with a growing amount of Russian crude heading east.
- Meanwhile, the amount of fuel and oil flowing from Asia and the U.S. to Europe is increasing to cover the shortfall.
- Russian seaborne oil exports have contracted sharply since the start of September, although shipowners are rushing to buy ice-class tankers to ship Russian oil during winter.
Russian oil flows are increasingly moving in an eastern direction, while fuels produced in the East will move in a western direction, Vitol’s chief executive Russell Hardy said at an industry event.
“It’s going to go further and longer distances and find different markets, and in doing that it’s going to have to trade at a discount,” Hardy said of Russian oil, as quoted by Reuters.
“You’re beginning to see that with fuel coming east that would otherwise have stayed in Europe, and fuel in the East going to the West to cover the shortfall,” the Vitol chief executive also said.
Meanwhile, the flow of U.S. oil to Europe will also increase as a European Union embargo on Russian crude comes into effect in early December. According to Hardy, U.S. oil exports to the EU will average more than 1 million barrels daily.
U.S. producers, however, have warned that importers shouldn’t rely on major increases in supply because production is growing at a modest pace.
Bloomberg reported earlier this month that Russian seaborne oil exports had contracted sharply since the start of September. The decline stands at 900,000 bpd for the period, to a total of 2.54 million bpd during the second week of September. This compares with 3.42 million bpd for the first week of the month, the report said.
Since the start of sanction action by the West, Russia has focused its exports on the East, with China and India taking in most of its crude. According to some analysts, the two countries will not be able to offset lost exports to Europe after the embargo kicks in.
At the same time, Bloomberg reported earlier this month that shipowners were in a rush to buy ice-class tankers, preparing to ship Russian oil during the winter. Total sales of these reached 42 between May and August this year, up from 12 a year earlier.