Analysis: How the Ukraine conflict is reshaping global oil markets

In this illustration taken on March 25, 2022, a petrol pump model is seen in front of the Ukrainian and Russian flag colors. REUTERS/Dado Ruvic/Illustration/File Photo

Sign up now for free and unlimited access to Reuters.com

  • Russian maritime exports to Asia hit 2.3 mbpd – Petro-Logistics
  • U.S. crude oil emissions in Europe hit record high in May: Kpler
  • Russian oil exports return to pre-invasion levels: IEA
  • Prices of some Nigerian crude grades peak on European demand

LONDON, May 30 (Reuters) – Russia’s invasion of Ukraine has reconfigured global oil markets, with African suppliers stepping in to meet European demand and Moscow, hit by Western sanctions, increasingly taking advantage of dangerous oil markets. Ship-to-ship transfers carry its crude oil to Asia.

The biggest supply-side restructuring of the global oil trade since the U.S. shale revolution changed the market about a decade ago signals that Russia will be able to navigate the European Union’s (EU) oil ban, provided Asia and China continue to buy its crude.

Sanctions imposed on Moscow after the Ukrainian conflict erupted in February, including a U.S. ban on its oil imports, prompted Russia to switch from Europe, which has shunned its crude, to customers in India and China, which are trading at discounts, according to industry data and traders. Great range.read more

Sign up now for free and unlimited access to Reuters.com

Russian exports returned to pre-invasion levels in April, and oil prices steadied around $110 after hitting a 14-year high above $139 a barrel in March, according to the Paris-based International Energy Agency.

Even if the European Union agrees to an oil ban in the next round of Russia sanctions, analysts say demand in Asia could moderate the impact.

“Unless the West exerts diplomatic pressure on Asian buyers, we will not see a widening supply gap and a surge in oil prices,” said Norbert Rücker of Julius Baer.

A complex patchwork of US, EU and UK sanctions has banned Russian-owned or Russian-flagged vessels from calling at ports, meaning some of the increased trade with Asia is being facilitated by sea-based ship-to-ship transfers – a costly process , where the risk of leakage is greater.

Overall, Russian oil shipments by sea to Asia have increased by at least 50 percent since the start of the year, according to tanker-tracking firm Petro-Logistics and other data.

Transshipments between ships, which make up only a fraction of the overall maritime trade, have been diverted from the Danish coast to the Mediterranean to avoid sanctions and protests.

“Ship-to-ship (STS) transshipments are common in Danish waters, at the entrance to the Baltic Sea,” Petro-Logistics president Mark Gerber told Reuters. “These don’t happen anymore; therefore, in warm and friendly Mediterranean waters, sanctioned tankers are The STS trend to unsanctioned tankers is increasing.”

Gerber estimates that the volume of Russian crude oil and products transported between Mediterranean tankers is around 400,000 barrels per day (bpd), with most going to Asia, adding 2.3 million bpd to direct shipments.

In January, before the invasion, about 1.5 million barrels per day were shipped directly to Asia.

Russian oil is loaded on Aframax or Suezmax tankers carrying less than 1 million barrels and transferred at sea to larger vessels that can carry 2 million barrels, making shipping more cost-effective, traders said.

Seaborne volumes are only a fraction of Russia’s total exports. Including pipeline supplies, total Russian crude oil and product exports rose to just over 8 million bpd in April, returning to pre-invasion levels.

West African Crude Oil

To make up for the loss of Russian oil, European refiners have been turning to imports of West African crude, with imports up 17% in April compared to the 2018-2021 average, according to Petro-Logistics.

Eikon data also showed an increase and showed that 660,000 bpd, mainly from Nigeria, Angola and Cameroon, will arrive in northwest Europe in May, with three Nigerian Amenam cargoes due in February.

Meanwhile, deliveries of West African crude to India nearly halved in April from 510,000 bpd in March to 280,000 bpd in April, Gerber said, as Delhi turned to Russia for supplies.

Prices for Nigerian light sweet crude in particular have hit record highs as European demand heats up, with Forcados crude, for example, being offered at a premium of at least $7 to Brent, according to traders.

Supply from North Africa to Europe has increased by 30% since March, Petro-Logistics said. Among them, arrivals to northwest Europe from the Egyptian port of Sidi Kerir, which analysts say is likely to be Saudi crude, will nearly double from March to more than 400,000 bpd in May, Eikon data showed.

The United States has also increased supplies to Europe. European deliveries of crude imported from the U.S. rose more than 15 percent in May from March, the highest monthly increase on record, data from tracking firm Kpler showed. Europe has discharged about 1.45 million bpd of crude oil from the United States.

Sign up now for free and unlimited access to Reuters.com

Additional reporting by Jonathan Saul, Editing by Carmel Crimmins

Our standard: Thomson Reuters fiduciary principles.