Commodity Trading Houses Help Keep Russian Oil Circulating

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LAUSANNE, Switzerland, March 25 (Reuters) – Commodity traders such as Trafigura and Vitol helped keep Russian oil in its Baltic and Black Sea ports in March when some Western companies began to snub the market, depending on vessel tracking, traders and shipping sources.

The two Swiss-based trading firms have struck long-term deals with Russian oil giant Rosneft (ROSN.MM) to load crude under deals struck before Moscow’s invasion of Ukraine sparked a wave of Western sanctions this month.

So far in March, the two companies combined have loaded 22 shipments of Urals crude, equivalent to 2.32 million tonnes of oil or 16.7 million barrels, data and sources show. followed by Refinitiv Eikon ships. They shipped 1.84 million tonnes in February and 1.80 million in January.

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Most of the oil the two companies buy comes from Rosneft, although much of the crude Vitol handles through Russian ports comes from Kazakh producers.

The purchases did not violate any restrictions imposed by the West and many European countries continue to buy Russian gas – even though some Western companies such as Shell (SHEL.L) and BP (BP.L) have stopped buying. buy Russian oil on the spot market. .

Other Swiss-based traders Glencore (GLEN.L), Gunvor and Petraco loaded Russian crude in March, although the volumes they took were slightly lower than in previous months, shipping data shows. and trader information.

The loading data offers an early indication of how the Ukraine conflict could reshape the global oil market, as soaring prices, volatility and the threat of sanctions make trading more difficult. Read more

With 12 Ural cargoes to load in March, according to shipment data as of March 25, Trafigura is having its busiest month since June, when it also loaded 12. Its monthly average since the start of 2021 to in February was 8.3 cargoes, according to data and trade sources.

Vitol’s 10 cargoes are comparable to February and January and broadly in line with an average of 9.6 since the start of its deal with Rosneft in October. Its monthly average for the first nine months of 2021 was 5.1 cargoes.

Benchmark Brent crude hit its highest level since 2008 this month on concerns over US and EU bans on Russian oil imports. Urals crude, meanwhile, traded at record highs relative to Brent prices. Read more

TAKE PRECAUTIONS

Trafigura and Vitol told Reuters they were fulfilling existing contracts and had made no new deals for Russian oil since the start of the Ukraine dispute, which Moscow calls a special operation, on February 24. They did not comment on the volumes of Russian oil they have. bought.

Although the long-term contracts are not public, three sources told Reuters that Trafigura has a deal running until at least next year, while Vitol’s runs until at least October this year. year. The sources said the contracts gave the companies great flexibility in how much oil they could buy each month. Read more

The companies previously declined to comment to Reuters on the terms of the agreements.

“We continue to comply with our legal obligations arising from existing forward agreements entered into before the war in Ukraine,” a Trafigura spokesperson said.

“We are taking every precaution to ensure that we fully comply with applicable regulations and sanctions and we continue to engage with customers and governments to understand their needs and provide the products and energy they need in a severely disrupted commodities,” the spokesperson said.

Deals for April are still ongoing, but so far Trafigura has lined up eight shipments for the first 10 days of the month and Vitol has six. The companies also offer Russian oil known as ESPO Blend, which is exported through Asian ports, in May.

The European Union on March 15 banned transactions with several Russian energy companies, including Rosneft. However, Brussels granted a two-month deadline for contracts already concluded and excluded “strictly necessary” purchases.

European oil refiners are now considering what exactly the new EU measures mean for purchases of Russian crude and some are looking for oil from elsewhere pending clarification, traders said.

Oil traders said they expect Trafigura and Vitol to continue crude purchases from Rosneft in April and May, but perhaps not at the volumes originally planned given potential difficulties in selling cargoes to buyers. Europeans.

NO NEW BUSINESS

Major Western oil companies TotalEnergies (TTEF.PA), Shell and Exxon Mobil (XOM.N) – as well as Finland’s Neste (NESTE.HE) – all loaded shipments of Russian oil in March.

Most were at the start of the month and ordered before the invasion, although Britain’s Shell picked up a shipment of heavily discounted Russian oil from Trafigura on March 4. Shell had pledged days earlier to end its operations in Russia and later apologized to the trade after a barrage of criticism. Read more

Some Ural cargoes that were due to be loaded by Western companies in the second half of March have now been cancelled. Shell, Neste and TotalEnergies said they had stopped new spot purchases of Russian oil. Exxon did not immediately respond to a request for comment. Read more

Trading house Petraco told Reuters that the Russian oil it had loaded or was to load had been contracted before the invasion of Ukraine and was strictly in line with government policies.

Petraco has a long-term contract with Russian oil producer Neftisa that runs until the end of 2022 and a short-term contract with state-controlled Zarubezhneft that expires at the end of March, according to traders.

Both Gunvor and Glencore have Urals tenders with Rosneft from October to March this year and most of the Russian crude loaded fell under those contracts. Neither is expected to load Rosneft oil in April, traders said.

Gunvor told Reuters it would not do any new business with Russia, while a source close to Glencore said it was only dealing with oil from pre-invasion contracts.

DESTINATION ASIA?

Russia plans to export 6.2 million tonnes of Urals crude from its Baltic ports and some 2.28 million via Novorossiysk in the Black Sea, according to the March loading schedule.

Although the final destination of some shipments may change, Russia’s total export volume for March is expected to remain broadly in line with its pre-invasion plans.

Most of the oil shipped in March is to go to Europe, with about a third going to India and China, according to shipping data.

However, traders said they expected around half of the oil to be moved to the Amsterdam-Rotterdam-Antwerp refining and storage center would likely be offloaded onto larger tankers and sent to Asia, given the reluctance of EU buyers to take Russian crude. Read more

Litasco, the Swiss trading arm of Russia’s Lukoil (LKOH.MM), had one of the largest shares of Russian maritime crude exports in March with some 1.5 million tonnes to load, according to shipping data. Litasco declined to comment.

China’s Unipec, the trading arm of Asia’s largest refiner Sinopec (600028.SS), took several shipments from the Urals in March, tracking and trading sources said. Unipec did not respond to a request for comment.

Traders said several shipments of Russian crude due to be loaded at the end of March did not yet have tankers lined up, raising doubts whether the loadings will take place.

While Swiss trading companies have loaded Russian oil, not all of their tankers have a firm destination yet, three trade sources said.

“It’s one thing to load the oil, it’s another to find the buyer,” said a Urals crude trader.

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Reporting by Julia Payne and Reuters reporters; Editing by David Clarke

Our standards: The Thomson Reuters Trust Principles.

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