By Sharon Cho, Rakesh Sharma and Prejula Prem (Bloomberg) –
Russia is finding oil buyers in Asia to replace sanctions-blocked European buyers – by grabbing market share from its energy allies.
From West Africa to the Middle East, producers in the OPEC+ alliance are feeling pressured as buyers in India and China — Asia’s biggest emerging markets — snap up cheaper Russian crude. The redrawn world map of oil trading could remain in place for years to come.
“There is every reason for Middle Eastern producers to worry that they could lose market share to Russian casks in China and India,” said Vandana Hari, founder of consultancy Vanda Insights in Singapore. “There seems to be no end in sight to the shift in trade flows.”
Prices for Russia’s flagship Urals variety plummeted last year as Europe held back on purchases in the wake of the Moscow War in Ukraine. Asia’s centers of power jumped into the void, helping Russia’s seaborne crude exports to post-invasion levels record in recent weeks.
India has historically relied on countries like Iraq, Saudi Arabia and the United Arab Emirates to supply the bulk of its crude oil imports. Now these producers feel pressured.
Since January 2022 – the month before Russia invaded Ukraine – India’s oil imports from the Middle East have fallen 35% to about 1.9 million barrels a day in April, Vortexa Ltd data shows. show. Shipments from West Africa fell by the same percentage to 228,000 barrels per day during this period.
Meanwhile, India imported a record 1.9 million barrels a day of Russian crude in April – compared to just 65,000 a day in January last year. Russia now competes with the Middle East as the country’s main supplier.
“This is sustainable as long as Russian prices are low,” said R. Ramachandran, former refinery director of Bharat Petroleum Corp. “Before Russia’s war with Ukraine, there was little demand for the Urals in India.”
According to data from Argus Media Ltd. On May 15, the price of Ural oils shipped to India – including shipping costs – was almost $12 a barrel cheaper than the world dated Brent benchmark. The discount has decreased by about $5 in the last two months.
According to Vortexa, China continues to receive a steady influx of Middle East oil, with shipments even increasing slightly since January 2022.
However, Asia’s largest economy has reduced its intake of West African crude oil by more than 40%. Deliveries fell to 730,000 barrels a day in April, from 1.3 million in early 2022. Angola remains by far the region’s largest supplier.
At the same time, China’s imports of Russian crude have surged 80% to about 1.5 million barrels a day since early 2022.
Organization of Petroleum Exporting Countries members and their allies are not the only ones seeing their share of the Asian oil market slip. Flows from the USA to India and European deliveries to China – including North Sea qualities – have declined.
However, India and China typically rely on the Middle East and West Africa, home of the major OPEC+ producers, for the majority of their crude oil supplies.
A glut of at least 35 million barrels of Nigerian oil, due to be shipped by the end of next month, has so far gone unsold, with a lack of purchases from Asia being a key cause of the build-up, according to traders.
Millions of barrels of West African crude have been stored in commercial facilities at South Africa’s Saldanha Bay hub this year, according to the International Energy Agency, as Asia buys Russian oil instead.
“The stocked supplies appear to be West African barrels that are struggling to find buyers east of Suez (because of cheaper Russian crude) while refineries in the Atlantic basin are being serviced,” its latest oil market report said this week.
–Assisted by Julian Lee, Sherry Su, Bill Lehane and Grant Smith.
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