(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Feb 16 (Reuters) - Similar to
what has already happened with Russian crude oil, there are
signs that the country's refined fuels are finding new buyers
outside Europe, with Asia and the Middle East the leading new
customers.
The European Union imposed a ban on imports of Russian oil
products from Feb. 5, to go along with its earlier sanctions on
crude oil as part of efforts to punish Moscow for its invasion
of Ukraine on Feb. 24 last year.
Russia has largely managed to work around the European ban
on buying its crude oil, diverting flows mainly to India and
China, albeit at prices well below the prevailing global crude
benchmarks such as Brent, West Texas Intermediate and
Oman/Dubai.
But it's likely to be a different story with re-routing
product exports, given that China and India are significant
exporters of fuels, and relatively minor importers.
However, there are opportunities for Russian products to
flow into both China, the world's biggest crude importer, and
India, the second-biggest oil importer in Asia.
Some Chinese refiners have the ability to process fuel oil
into higher value products such as diesel and gasoline, and if
Russian cargoes can be offered at a cheap enough price, there is
scope to increase this trade.
China's imports of Russian fuel oil are expected to hit a
record high in February, with commodity analysts Kpler tracking
arrivals of 5.62 million barrels, up from 3.89 million in
December, which was the previous all-time high.
India has also been lifting its imports of Russian fuel oil
since the attack on Ukraine, with Kpler estimating 4.484 million
barrels arrived in January, which was the second-highest on
record behind the 4.88 million in October, and more than three
times the 2021 average of 1.45 million barrels a month.
India has also turned to Russian naphtha, with February
arrivals of the chemical feedstock expected to reach 1.49
million barrels, a record high.
India only rarely bought Russian naphtha prior to the war in
Ukraine, but has been buying more since September last year.
Outside of the big heavyweights of Asia, Russia has some
scope to boost oil product shipments, with product importing
countries such as Indonesia, Pakistan and Bangladesh possible
targets, even though so far there are no signs of any flows to
these buyers.
SAUDI, EMIRATES
The other region that offers scope for Russian products is
the Middle East, where the United Arab Emirates (UAE) and Saudi
Arabia have been increasing imports.
The UAE is expected to import 3.0 million barrels of Russian
fuel oil in February and 4.34 million in March, according to
Kpler, up from 750,000 barrels in February last year.
Saudi Arabia's imports of Russian fuel oil are expected to
reach 1.98 million barrels in February, up from 370,000 barrels
in the same month last year.
Both Saudi Arabia and the UAE can utilise Russian fuel oil
to displace crude in direct-burning for power generation.
This has the advantage of freeing up higher value domestic
crude oil for export or for processing in refineries for export
as fuels.
The UAE is expected to export 5.69 million barrels of diesel
in February, a five-month high, with Europe the destination for
4.36 million barrels, with Asia taking 650,000 barrels and
Africa 690,000 barrels.
In February 2022 the UAE exported 5.47 million barrels of
diesel, but only 1.91 million barrels went to Europe, with Asian
countries taking 900,000 barrels and African nations 1.82
million barrels.
It's likely that these sort of shifts in the flow of
products around the globe will continue as traders, refiners and
consumers adjust to the European ban on imports of Russian
products.
Similar to crude it's also likely that volumes will hold up,
although Russia may battle to offload all of its higher-value
refined fuels, especially diesel.
The questions as to how big a financial blow will be dealt
to Moscow from lower product export revenue remains to be
answered, but it would appear that the biggest beneficiaries of
the ban on products will be those refiners that can snap up
cheap Russian fuel oil and naphtha and process them in higher
value products.
The opinions expressed here are those of the author, a columnist
for Reuters.
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GRAPHIC-Imports of Russian fuel oil by China, India and
Saudi/UAE: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(By Clyde Russell; Editing by Christopher Cushing)
Messaging: clyde.russell.thomsonreuters.com@reuters.net))
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