The United States and other countries have banned imports of Russian crude and oil products alleging its invasion of Ukraine and others have avoided acquiring cargoes out of fear of future sanctions. The European Commission is considering an embargo of Russian oil.
The volume of Urals crude oil on the water is triple the pre-war average, even as Russian seaborne oil exports fell to 6.7 million barrels per day (bpd) in May, down about 15% from the 7.9 bpd in February this year.
"The headline numbers, showing Russian exports are still relatively strong, don't tell the full story," said Houston-based energy strategist Clay Seigle. "Russian oil at sea is continuing to accumulate."
The number of Urals cargoes at sea with no set destination is 15% of the total, also a new high, Seigle added. Some of the oil could be in transit to undisclosed buyers, while others could be unsold cargoes.
Most barrels of Russian crude oil have headed to Asia, mainly India and China, while volumes to Europe have also ticked up ahead of a ban
China a key buyer
China is quietly ramping up purchases of oil from Russia at bargain prices, according to shipping data and oil traders who spoke to Reuters, filling the vacuum left by Western buyers backing away from business with Russia after its invasion of Ukraine in February.
The move by the world's biggest oil importer comes a month after it initially cut back on Russian supplies, for fear of appearing to openly support Moscow and potentially exposing its state oil giants to sanctions.
China's seaborne Russian oil imports will jump to a near-record 1.1 million barrels per day (bpd) in May, up from 750,000 bpd in the first quarter and 800,000 bpd in 2021.
Unipec, the trading arm of Asia's top refiner Sinopec Corp, is leading the purchases, along with Zhenhua Oil, a unit of China's defense conglomerate Norinco, according to shipping data. Livna Shipping, a Hong Kong-registered firm, has also recently emerged as a major shipper of Russian oil into China, the traders said.
These firms are filling the hole left by western buyers after Russia's invasion of Ukraine, which Russia calls a "special military operation."
The United States, Britain and some other key oil buyers banned imports of Russian oil shortly after the invasion. The European Union is finalizing a further round of sanctions, including a ban on Russian oil purchases. Many European refiners have already stopped buying from Russia for fear of running afoul of sanctions or drawing negative publicity.
Vitol and Trafigura, two of the world's biggest commodity traders, phased out purchases from Rosneft, Russia's biggest oil producer, ahead of an EU rule that came into effect on May 15 barring purchases unless "strictly necessary" to secure the EU's energy needs.
The situation began taking a drastic turn after the exit of Vitol and Trafigura that created a vacuum, which could only be filled by companies that can provide value and are trusted by their Russian counterparts.
The low price of Russia's oil – spot differentials are about US$29 less per barrel compared with before the invasion, according to traders - is a boon for China's refiners as they face shrinking margins in a slowing economy. The price is well below competing barrels from the Middle East, Africa, Europe and the United States.
