A week after Russia’s invasion of Ukraine, Russian oil is struggling to find buyers, who fear stigma, possible future sanctions and logistical complications, despite the growing concern about market shortages.
“Oil trade remains frozen and we estimate that 70% of the market” is paralyzed, “with a particularly large impact on maritime sales,” explains Livia Gallarati, an analyst at the Energy Aspects cabinet.
For now, Western sanctions against Russia have tried not to touch the energy sector, which is crucial for Europe: Germany, for example, imports 55% of its gas from Moscow. As for oil, Russia is the world’s second largest exporter, behind Saudi Arabia.
But while already guaranteed pipeline deliveries continue, many brokerage firms and refiners prefer to avoid Russian crudedespite tensions in oil supply.
The risk is that prices will rise even morewhich have been skyrocketing from record to record for days: a barrel of Brent, a benchmark for the European market, costs more than 110 dollars, compared to less than 65 a year ago.
In addition to the risk of governments changing their minds on sanctions, analysts note the possibility of importers being subject to public condemnation.
In northern Europe, the Finnish refinery Neste “has almost completely replaced Russian crude with other sources, especially from the North Sea,” the group said in a statement. Also the Swedish Bitumen specialist Nynas has announced that “it will stop buying raw materials of Russian origin”.
Potential Asian buyers
According to Gallarati, even oil that is not Russian but is exported from that country, such as Kazakh crude, currently has difficulties leaving Russian ports, as shipping companies also avoid them.
But he thinks buyer uncertainty could dissipate. if the West continues to rule out energy sanctions: “We will be able to see which buyers are willing to resume purchases.”
“China and India are likely to resume buying once freight, insurance and payment issues are resolved,” he says.
Sanctions against Russia make it difficult and expensive to secure and ship cargo, as well as financial transactions. But Indian and Chinese refineries will not be able to absorb all Russian production: Each country builds its refineries based on the crude it intends to use and it is difficult to adapt the infrastructure.
In the longer term, “Western companies will stop helping Russia with financing and technology for its extraction projects,” predicts Jarand Rystad, director of analyst firm Rystad Energy.
Rystad considers in a note that, even without direct sanctions, Russian exports will fall by one million barrels per day. “Gigantic projects like Vostok Oil are at risk of being delayed and others could simply be cancelled, as oil projects have a limited lifespan with the energy transition,” he stresses.
Swiss oil products trading giant Trafigura announced on Wednesday that is “reviewing its options on its passive interest in Vostok Oil”, one of the main projects of the Russian oil company Rosneft in Siberia.
European buyers are currently turning to Middle Eastern oil, but the two main producers that could increase their output, the United Arab Emirates and Saudi Arabia, are reluctant to do so.
This situation does not go unnoticed by Iran, which is in the midst of nuclear negotiations in Vienna.
If the United States lifts its sanctions on that country, the Iranian oil minister estimated in February that his country could export 2.5 million barrels a day, almost half the volume of Russian exports, and promised on Wednesday that it could increase even more. the extractions.