Russian oil found some buyers even at huge discounts

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Russian oil found some buyers even at huge discounts

HOUSTON – The United States and the European Union are unwilling to impose sanctions on Russian energy exports in response to the country’s invasion of Ukraine. But some oil traders have concluded that buying oil from Russia is not worth the trouble.

One of the world’s three top oil producers after the United States and Saudi Arabia, Russia provides about 10 percent of the global supply. But traders and European refineries have greatly reduced their purchases of Russian oil in recent days. Some have come to a complete standstill.

Energy experts said buyers are holding back because they or the shipping companies, banks and insurance companies they use are concerned about Western sanctions now or later. Others are concerned that shipments could be affected by missiles, and some do not want to risk being seen as controlling the government of President Vladimir V. Putin.

Analysts said Russian exporters have been offering the country’s highest quality oil at discounts of up to $20 a barrel in recent days, but found few buyers. Buyers, especially in Europe, are switching to Middle Eastern oil, a decision that has helped drive the global oil price above $100 a barrel for the first time since 2014.

Tom Kloza, global head of energy analysis at the Oil Price Information Service, said: “Proponents of oil exports – banks, insurance companies, tanker companies and even multinational oil companies – enacted what amounts to a real ban. Is.” Mr Kloza said it could take weeks to become clear how much Russia’s oil exports have fallen and whether they will continue to decline, but “clearly limits the Russian contribution to world oil supply.”

On Tuesday, the International Energy Agency said its members, which include 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 effect on global oil prices, perhaps because the amount was modest, equivalent to about three days of consumption by the United States. The White House and the Energy Department indicated that more oil could be released later, describing the IEA agreement as an “early release”.

Most of Russia’s oil is shipped from Black Sea ports for use in Europe. Some shipping companies carrying oil and commercial goods fear that their ships will be fired upon. Congestion on sea lanes is hampering the movement of not only oil but also food. On Friday, an unidentified missile hit a Moldovan-flagged tanker carrying oil and diesel.

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“Russia’s leading Ural blend was one of the first to break the $100 a barrel mark this year,” said Lewis Dixon, senior oil market analyst at Rystad Energy, a research and consulting firm. “But the country’s incursion into Ukraine has now 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 trying to sell their crude by offering discounts to refineries in China and other Asian countries.

About five million barrels of Russia’s daily oil exports go to Europe. About 700,000 barrels are consumed daily in the United States, which is about 4 percent of the US market.

Several Scandinavian refiners, including Finland’s Neste Oz and Sweden’s Prim, have said they have halted purchases of Russian oil.

“Due to the current situation and market uncertainty, Nesté has replaced most of the Russian crude oil with other crude oil such as North Sea oil,” said Nest spokesman Theodor Rolfvondenbaumen. As the company looks at future sanctions and “potential countermeasures,” he said, it is preparing “for a variety of options in procurement, production and logistics.”

Energy experts say international oil trade could be restarted in the same way that Britain, France and Israel in 1956 invaded Egypt and closed the Suez Canal. For some time, oil tankers were rerouted around Africa. Similarly, Russian oil once shipped to Europe could go to China in the next few months.

“The trade shutdown could take six to eight weeks,” said Michael Lynch, president of Strategic Energy and Economic Research, an occasional adviser to the Organization of the Petroleum Exporting Countries. Huh.”

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

“If China wants to, they can use the power of their wallets to either humiliate Putin by depriving him of a customer or elevate him by bailing him out financially,” he said.

While Western countries have imposed tough sanctions on Russian banks and Mr Putin’s wealthy allies, they have left the Russian oil industry alone to avoid disrupting global supplies and further fuel inflation.

Global and US oil prices have surged as fighting intensified in Ukraine this week, and hopes of a negotiated settlement dwindled. Markets were tight even before the crisis, with demand picking up as coronavirus cases fell, allowing consumers and businesses to return to normalcy.

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