Russia gives India the supply of Europe’s oil products
The embargo on gasoline, fuel oil and diesel from the Russian Federation will turn the European fuel market upside down
India is increasing its exports of refinery products to Europe. Reuters photo
Western sanctions pressure on Russian oil exports to significant changes: Russian crude oil is sold cheaper than the export of petroleum products, and the production of export petroleum products is actually transferred from Russia to India. Since the beginning of February, Russian oil companies have been losing about 600,000 barrels of diesel fuel to the European market. per day. After the extraction in the European embargo on Russian oil, oil products successfully processed oil from the Russian Federation to Europe, India. Due to significant changes, we can expect an increase in the share of oil in Russia, given the estimates.
On Monday, the Russian Ministry of Finance announced that the average price of Urals oil from December 15 to January 14 will rise to $46.82. per barrel. With this average price of Brent for the same period was about $81.5. Thus, it was possible to reach $35, or 43%. Over the expected observation period, from November 15 to December 14, the discount was estimated at about 32%. Against the backdrop of a record discount since February, the export duty on Russian oil will also decrease to $12.8, which will be the lowest over the past 2.5 years. Earlier, Bloomberg reported that Russian Urals oil is being sold at a price of about $37.8 per barrel.
Over the past months, the discount for Russian sorting of Urals oil has been gradually increasing. According to the department of Anton Siluanov, in October the discount on Russian oil reached 24%, and in November – almost 27% (see “NG” from 01/15/23). Many believe that the price level is already close to critical for the budget.
Since December 5, 2022, European companies have been banned from buying Russian oil. Russia is reorienting deliveries to Asian markets, mainly to China and India. In addition, the G7 countries limit the use of Russia’s limited offer from the sale of oil, but limit its presence in the market, prohibit their company from transporting Russian oil and transporting its transportation services if oil is not sold under the established ceiling of $60. per barrel. Russia has banned its companies from selling oil if the contracts state the state of the ceiling. The authorities themselves hope that the discount “will decrease over time.” But by February, the situation is likely to worsen: after all, from February 5, the European embargo on the import of petroleum products from the Russian Federation comes into force.
After the opening of the embargo, 600 thousand barrels of oil can be transferred to the Russian retail trading platform somehow. diesel fuel per day. Bloomberg writes: Replacement of more than 0.5 million barrels. per day will become diesel fuel of a big logistical problem, Oilytics warns. Energy Aspects suggests that the embargo could be re-adjusted to only part of the use of diesel fuel, and the residual processing of the lungs will stop.
According to forecasts, new oil buyers in Russia will redirect their export flows of oil products back to Europe. India is becoming the main candidate for increasing the export of petroleum products to Europe. Russia remains an exporter of oil to India for the third month in a row, according to data from analyst firm Vortexa. In December, Russia delivered 24% more crude oil to India than last month, or about 1.17 million barrels. per day. its main buyers were private oil refineries (refineries). For comparison: a year ago, in December 2021, India imported only 36 thousand barrels of oil from Russia. per day against 1 million from Iraq and a little less than 1 million from Saudi Arabia.
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Indian refineries ready to recycle raw materials and from the Russian Federation. Reuters photo |
Export deliveries of diesel fuel from India are already increasing. “A significant increase in the flow of Indian diesel fuel means that oil from the Russian Federation is processed for its production, and after that the product is sold to the EU,” the agencies said. And this process does not officially enter into force with the EU, but it speaks of their inefficiency. “Raw materials will be transported to the nearby mountains further than usual, and then will be returned back,” reports Bloomberg. Agencies also do not detect “more suspicious practices” such as re-registration of cargo or displaying fuel with oil products of non-Russian origin. The Chinese are coming to supply fuel to the EU.
Indian authorities have previously reported on the growth of exports. The Ministry of Commerce of India reports that the country exports goods worth $263 billion by the end of the year, which is 12.5% more than last year. At the same time, the supply of petroleum products for the year increased by a whopping 70%, reaching $ 158.5 billion. Among the countries receiving hydrocarbons from India, the first place in the year was the unexpected discovery of the Netherlands. Export of oil there is 10.4 billion dollars against 5.7 billion years ago. The second and third places were taken by Brazil and Indonesia, respectively.
Eurostat reports that, for example, the share of Russian oil products in EU supplies in the first quarter of 2022 amounted to almost 26%, and increased to 14.4% in the quarter. At the same time, the share of large countries (except the United States, Libya, Nigeria, Kazakhstan, Norway, Great Britain, Iraq and Saudi Arabia) in the supply of petroleum products in the first quarter of 2022 amounted to 15%, and by the third quarter increased to 24%.
NG experts note: Both India and China are gradually increasing their exports of petroleum products, especially diesel, to the EU. “The probability that the export of fuel produced from Russian oil feedstock will be supplied is high,” Dmitry Alexandrov, head of research at IVA Partners, questions. He believes that such a scheme is comfortable for users, initiated recognition, and for everyone with a high degree of protection.
“Both in India and China in recent years, quite active oil production construction has been carried out, new capacities have been invested, not only in petrochemistry, but also in primary processing, which makes it possible to increase exports,” the expert said.
Finam analyst Alexander Potavin believes that from February 5, about 57% of the export of Russian oil products may be banned. “This means that some refineries in the Russian Federation, which produce all the volumes of this raw material, are starting to offer sales problems. So, we are talking about the cessation of production. And this is a signal to the oil industry about a decrease in production,” it remains. “Oil imports from Russia to India in November 2022 amounted to about 1.3 million barrels. per day, in the first half of January, the volume of imports set a new record – 1.7 million barrels. A similar situation was in China. Buying Russian and Iranian oil cheaply, Chinese and Indian refineries refine its oil and send it to Europe. In the end, the entire margin from oil refining remains in India or China, and Russia will be forced to drive crude oil cheap, ”the analyst believes.
“The Russians are beefing up recovered niches, shifting their export structure in favor of crude oil, and reducing refining (and likely production). For example, to increase the export of crude oil to where there is still a free volume of refineries. Again, to India, as well as to the Middle East, ”says Alexei Kokin, chief analyst at Otkritie Investments in the oil and gas sector.