Chinese Refiners Are Importing Less Russian Oil
The expected shift in Russian crude oil flows toward Asia is well underway ahead of the December 5 oil embargo.
Before Russia invaded Ukraine, less than 40% of Russia’s crude oil made it to the valuable Asian market. Today, however, nearly 70% of Russia’s oil goes to Asia, with India and China topping the buyer’s list.
For November 11, total crude oil from Russia fell to a three-week low of 2.9M BPD.
However, Chinese refiners appear to be delaying purchases of Russian crude in December as China pays a lower premium due to EU sanctions that come into force on December 5 and the approach of the G7 price cap. Chinese refiners cut ICE Brent on a DES basis to $1.70-1.90 a barrel from $2.70 two weeks ago. “It’s all under the radar right now,” he said, making it difficult to track transactions.
Brent crude and West Texas Intermediate crude futures rose nearly 1% earlier in the session before retreating.
US West Texas Intermediate crude futures were down $1.341, or 1.512%, at $87.6021 per barrel after closing 2.9% higher on Friday.
Brent crude futures fell $1.021, or 1.061%, to $94.831 per barrel after rising 1.121% the previous day.
Commodity prices rose on Friday after China’s National Health Commission reviewed measures to prevent and control the spread of the novel coronavirus (COVID-19). Over the weekend, the number of people infected with the coronavirus in China increased.
Russian Oil Suppliers Rush to Beat EU Ban
Russia’s seaborne fuel exports have reached their highest level since at least 2017 this month, as the country’s refiners rush to make deals before European Union import and shipping restrictions take effect. The country’s average daily exports of oil products increased 22% from the previous month to around 3.171M barrels from November 1 to 10.
The EU will impose restrictions on the import of most Russian crude oil and refined products on December 5 and February 5, respectively. The alliance also bans EU-flagged tankers from carrying cargo and prevents third-party vessels participating in the trade from receiving maritime services, including insurance.
The IEA estimates that restrictions imposed after the October invasion of Ukraine will force Russian producers to find new markets for at least 1.6M barrels of crude oil and 1M barrels of oil products per day. The restrictions will put the continent’s supply at risk because alternative fuel sources may not be able to fill the void.
Germany Nationalizes Sefe to Oust Gazprom
Germany will nationalize gas importer Sefe, formerly Gazprom Germania. This way, it will save it from bankruptcy and squeeze Russia out of business, the Economy Ministry said on Monday.
Sefe was liquidated by Russia’s Gazprom (GAZP.MM) earlier this year and handed over to German state authorities in April. Since then, it has received nearly 10B euros ($10.3B) from state-backed credit lines. The minister said the measure is necessary to ensure the country’s energy supply. Sefe is facing bankruptcy after falling Russian imports cost it billions of euros as the company, and other gas importers turned to expensive spot markets to source gas elsewhere.
On Monday, the German economy ministry ordered a capital cut under a new energy security act, reducing Sefe’s previous registered capital of 225.6M euros to zero. As a result, Gazprom will lose its investment.
The ministry stated that it would have compensation, which the market value of Safe would determine. It was also stated that the compensation procedure had not yet been completed.
