The reroutings mark the biggest supply-side shakeup of the
global oil trade since the US shale revolution altered the shape of the market
around a decade ago and suggest Russia will be able to navigate a European
Union (EU) oil ban, provided Asia and China continue to buy its crude.
Sanctions imposed on Moscow after the conflict in Ukraine
kicked off in February, including a US ban on its oil imports, have prompted
Russia to pivot away from Europe, where its crude is shunned, to customers in
India and China who are picking up cargoes at a steep discount, according to
industry data and traders.
Russian exports were back to pre-invasion levels in April,
according to data from the Paris-based International Energy Agency and oil
prices have stabilized around US$110 after hitting a 14-year high above US$139
a barrel in March.
Even if
the European Union agrees to an oil ban in its next round of Russian sanctions,
analysts said the impact could be tempered by demand from Asia.
"Unless the West puts diplomatic pressure on Asian
buyers, we do not see the supply gap widening and oil prices spiking,"
said Norbert Rücker of Julius Baer.
A complex patchwork of US, EU and British sanctions have
prohibited Russian-owned or flagged ships from calling at ports meaning that
some of the increased trade to Asia is being facilitated via ship-to-ship
transfer at sea -- a costly process where the risk of spills is greater.
Overall,
the flow of Russian oil to Asia via the sea has jumped at least 50% since the
start of the year, according to tanker-tracker Petro-Logistics and other data.
Transfers between vessels, which account for a small
fraction of the overall sea trade, have shifted away from the Danish coast to
the Mediterranean Sea to avoid sanctions and protests.
"Ship-to-ship (STS) transfers were common in Danish
waters, at the entry point of the Baltic Sea," Petro-Logistics President
Mark Gerber told Reuters. "Those are not happening anymore; hence the STS
trend of sanctioned tanker to non-sanctioned tanker increasing in the warmer
and friendlier Mediterranean waters."
Gerber put the volumes of Russian crude and products being
transferred between tankers in the Mediterranean at about 400,000 barrels per
day (bpd), of which the majority is going to Asia, adding to the 2.3 million
bpd going directly.
In
January, before the invasion, around 1.5 million bpd were being sent directly
to Asia.
Russian oil is loaded on Aframax or Suezmax tankers that
carry less than one million barrels and it is transferred at sea to larger
vessels that can take 2 million barrels, making shipping more cost effective,
traders said.
The seaborne volumes are only part of the total exports from
Russia. Including pipeline supplies, total Russian crude and products exports
increased to just above 8 million bpd in April, back to the pre-invasion rate.
To
compensate for the loss of Russian oil, European refiners have been turning to
imports of West African crude, which are up 17% in April compared to the
2018-2021 average according to Petro-Logistics.
Eikon data also shows an increase and indicates 660,000 bpd
mostly from Nigeria, Angola and Cameroon is arriving in northwest Europe in
May, with three cargoes of Nigerian Amenam coming compared to one in February.
Volumes
of West African crude to India, meanwhile, have nearly halved, according to
Gerber, with 280,000 bpd delivered in April from 510,000 bpd in March as Delhi
switches to Russian supply.
With European demand red-hot, the prices of Nigerian light,
sweet crude grades in particular are hitting record highs, according to
traders, with Forcados crude for example offered at a premium of at least US$7
to Brent.
Supply
from North Africa to Europe is up by 30% since March, Petro-Logistics said. Of
this, Eikon data indicates arrivals into northwest Europe from Egypt's Sidi
Kerir port, which analysts say is likely Saudi crude, will almost double versus
March to above 400,000 bpd in May.
The United States has also boosted supply to Europe.
European crude imports in May from the US on a delivered basis are up over 15%
versus March, according to tracking company Kpler, the highest monthly pace in
its records. Europe has discharged about 1.45 million bpd of crude from the
United States.
