Global oil markets are still trying to find a bottom as oil prices become increasingly volatile. The expected EU ban on Russian oil imports, which will be put in place on December 5, is expected to shake up the fundamentals. As EU countries seek to wean themselves off Russian crude, the appetite of EU trading companies for Russian oil remains intact. Bloomberg reported that Europe imported around 1 million bpd in the week ending September 2. This number is significantly above the August average of 800,000 bpd. Some, however, reiterated that it is below June levels, which were 1.28 million bpd. The still high interest does not yet show a real will at European level to reduce imports of Russian oil from the Union in view of the December 5 deadline.
At the same time, Russia’s overall maritime crude shipments, which officially head mainly to Asia, also remain strong. Overall, Moscow volumes are up 13% to 3.32 million bpd. While Asian volumes are stable, volumes of Russian crude to the Amsterdam-Rotterdam-Antwerp (ARA) region increased by 13%. It is estimated that total Russian exports to the global market brought in around $167 million in revenue during the week of September 2.
In view of the above data, the EU’s dependence on Russian energy is still extremely high, and cutting its energy ties with Moscow does not seem at all an easy task. So why is it so difficult to end Russian oil imports? Until other producers are able to fill the void, European refineries continue to process large quantities of Russian Urals crude. As Shell CEO Ben van Beurden said, the main driver of European demand for Russian crude is that OPEC producers are currently unable (or unwilling) to produce the volumes needed. Related: Record Gas Prices Could Be Bullish For Oil
At the same time, it is becoming increasingly clear that official volumes of Russian crude are not the only ones heading to European markets. Unspecified volumes or Russian crudes mixed in Asia are loaded onto tankers bound for European destinations. The Japanese news site Nikkei reported that since the Russian invasion of Ukraine, 41 ships have carried out oil-to-ship transfers off the coast of Greece, involving Russian crude. In comparison, in 2021 there was only one ship. Experts expect this after the ban on December 5. these ship-to-ship transfers will increase further. Refinitiv reported that Russia has exported 23.86 million barrels of oil via ship-to-ship off Greece so far in 2022. In 2021, the volume was just 4.34 million barrels. Tracking of these vessels showed that 89 tankers arrived at ports, including 41 at ports in Greece, Belgium and elsewhere in Europe.
These developments show that there are still huge gaps in EU sanctions. If the EU really wants to hit Moscow’s cash cow, tougher measures are needed. Mixing rough is an old trick to hide the origin of cargo. At the same time, it has already been reported that countries in Asia and the Middle East are heavily involved in the re-export of old volumes of Russian crude, according to new specifications or qualifications to Europe.
And it’s not just Asian countries that are complicit. Turkey, Egypt and possibly Algeria are possible gateways for Russian rough to reach not only global markets, but especially European markets. Libya and Iraq are great examples of countries that have tons of experience circumventing international sanctions. Iran is currently able to get its crude and its products to market, even when US sanctions are meant to keep Iranian crude out of the market. In the coming months, European leaders will have to decide whether a normal ban on Russian oil is as effective as they expect. 3rd party sanctions are needed to ensure that Russia does not simply export its crude to other destinations in the Middle East, Africa and Asia. Pretending that it won’t happen is not only stupid but also counterproductive.
By Cyril Widdershoven for Oilprice.com
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