European Union leaders reached an agreement this week to ban the majority of imports of Russian crude oil and petroleum products, but nations were already shunning the country’s oil, altering global flows of the raw material that powers the world. world.
Russian oil exports had already been affected by some EU members acting preemptively in anticipation of potential measures, in addition to bans from countries like the United States, according to commodity data firm Kpler.
The amount of Russian crude that is “on the water” jumped to nearly 80 million barrels this month, the company noted, from less than 30 million barrels before the invasion of Ukraine.
“The increase in crude on water volume is due to more barrels heading further afield, particularly to India and China,” said Matt Smith, principal oil analyst for the Americas at Kpler. .
“Before the invasion of Ukraine, a lot more Russian crude was moving to destinations near northwest Europe,” he added.
Russia’s invasion of Ukraine in late February rocked energy markets. Russia is the world’s largest exporter of oil and products, and Europe is particularly dependent on Russian fuel.
EU leaders had been debating a sixth round of sanctions for weeks, but a possible oil embargo has become a sticking point. Hungary is one of the countries that has not accepted a general ban. Prime Minister Viktor Orban, an ally of Russian President Vladimir Putin, said a ban on Russian energy would be an “atom bomb” for Hungary’s economy.
Monday’s deal between the bloc’s leaders targets Russian maritime crude, leaving room for countries including Hungary to continue importing supplies by pipeline.
In March, oil prices rose to their highest level since 2008 as buyers worried about energy availability given the already tight market conditions. Demand has rebounded following the pandemic, while growers have brought production under control, meaning prices were already rising before the invasion.
“Russia’s invasion of Ukraine has triggered an upheaval in the way the global market has historically sourced barrels,” RBC said in a note to clients on Tuesday.
The International Energy Agency said in March that three million barrels a day of Russian oil production was at risk. These estimates have since been revised downwards, but data collected before the EU agreed to ban Russian oil shows that Russian fuel exports to NW Europe had already fallen off a cliff. .
But Russian oil still finds a buyer, at least for now, as the country’s Urals crude is trading at a lower price than international benchmark Brent crude.
More oil than ever is heading to India and China, according to Kpler data.
Wolfe Research echoed this point, saying that while Russian oil production has declined since the start of the war, exports have remained “surprisingly resilient.”
The company said Russia had rerouted exports to countries like India, which shows up in maritime traffic through the Suez Canal. Analysts led by Sam Margolin noted that traffic on the key waterway rose 47% in May compared to the same period last year.
“Rerouting Black Sea tankers to Suez as opposed to Europe is a longer and therefore inflationary route for oil prices, and these ‘last resort’ business models may portend bigger supply problems. going forward as the market is clearly at its last options to clean up,” the firm said.
– CNBC’s Gabriel Cortes contributed reporting.