The main destination for crude oil is Europe, with the Netherlands and Germany as its largest buyers. But America and Asia also appear as two important destinations. Russia used to send about 7% of its crude exports to the United States. And in Asia it has big clients, with China and South Korea at the top of the list.
The Energy Intelligence estimate says that in the first week of March – during the first days of the armed conflict and even without the sanctions being evident – crude oil exports from Russia fell to 1.6 million barrels per day, from approximately 4.7 million barrels. traded before the beginning of the Russian occupation.
The barrels of Russian oil that are currently being traded are those that were purchased before the occupation of Ukraine.
The fear of buying has not only remained in the West, although this region is the most affected because some of its refineries work with the Russian mix. Countries in the Asian market also already have some fears and have decided to reduce their purchases, explains Abhi Rajendran, an analyst at Energy Intelligence based in New York. Companies are concerned about possible damage to their reputation or credit profile. Doing business with Russia has become a far-reaching corporate decision.
The companies and traders they do not want to be related to Russia and to be thought that they are continuing to inject resources into that economy, which could be used to continue financing the military occupation.
“Disruption is coming from everywhere. It is even affecting Asian buyers as well, buyers from South Korea or Japan and other parts of Asia are stopping buying Russian crude because they are worried about sanctions. It’s basically impacting, to different degrees, buyers all over the world,” says Rajendran. Fears have spread to the companies that transport and store the crude and to the ports that provide access to the product.
In recent days, the price of Urals oil, the benchmark or Russian market benchmark, has closed $15 on average below Brent, the main benchmark mix. But the price at which Russian oil has been sold has been even lower. Many traders and refiners are asking dealers for discounts to close the deals.
The giant Shell bought a cargo of Russian oil from Trafigura at the beginning of March, with a historical discount of 28.50 dollars over Brent, reported Reuters. After that, the oil company apologized and said it would withdraw from any commercial dealings with Russia.
The exclusion of some Russian banks from the SWIFT system is also complicating the purchase of Russian crude. The network used for transactions with dollars from banking institutions around the world is decisive for exports.
Russian oil, like all other blends, is traded in dollars or other currencies that are easily converted to US currency. This requires some form of participation from US banks and few are willing to act as intermediaries. Some companies doing business with Russia are also running out of guarantees from many banks and that also limits transactions.
Analysts think Western sanctions could create a huge opportunity for Chinese involvement. This week Bloomberg disclosed that the Chinese government is in talks, albeit still at a very early stage, to acquire stakes in some Russian oil and metals companies. A move that could give the Asian country the raw materials to continue its growth and Russia the cash flow it needs right now due to sanctions.
The exit of large European companies from Russia, such as the British BP and the American Shell, are increasing the opportunities of the Asian giant.
China, which is the fourth largest importer of Russian oil, could also increase its purchases of the product, but a strong change in the purchasing pattern is not made from one day to the next, much less at the current high oil prices, says the analyst. from Energy Intelligence. “They are buying, but it’s not like they’re buying like crazy, especially now that prices are so high,” he explains. “This is not 2020, when prices were so low, that you could take advantage of it in a good way, now you are only buying essential oil. It’s not a quick turnaround for new buyers.”
The markets have begun to lower their fears about a possible shortage of crude oil, especially for the European region. The prices of the main mixtures fell again on Friday. Brent oil closed at ** and WTI at **, after hitting its highest price since 2008 a few days ago.
But even if the sanctions on Russia were reduced right now, buyers would take a while to return and the global purchasing dynamic would, yes or yes, recompose. “This situation will continue for a long time. The market will not recover anytime soon, even if the sanctions are lifted, it will take a while for buyers to come back. If they come back,” says Rajendran.