
FX Daily Updates
Russia oil sanctions create different winners at different times: Russell
LAUNCESTON, Australia, Jan 29 (Reuters) - The crude oil market is adapting quickly to the new sanctions against Russia's shadow fleet of tankers, albeit by creating both short- and medium-term winners and losers. The short-term winners are the oil exporters of the Middle East, who have seen demand for their crude rise as refiners in India and China seek alternatives to Russian cargoes. Tanker owners are also benefiting from higher rates for vessels that aren't part of sanctions imposed by the United States and other Western countries on Russia's crude exports. On the other side of the ledger, Indian and Chinese refiners are the losers, with their costs rising as they replace Russian crude with more expensive alternatives. The cash price of Middle East benchmark Dubai crude ended at $81.25 a barrel on Tuesday, a premium of $3.63 to Brent futures . Dubai usually trades at a discount to Brent, but has been at a premium of more than $3 a barrel since the outgoing administration of former U.S. President Joe Biden announced tough new measures against Russia, including sanctions on tankers operating as part of Moscow's so-called shadow fleet. Indian refiners are reported to be struggling to source Russian cargoes for March delivery, with Anuj Jain, the head of finance for top refiner Indian Oil, saying during an earnings call on Tuesday that the company expects lower arrivals from Russia. India is the biggest buyer of Russian crude, taking 1.71 million barrels per day (bpd) in 2024, or nearly 40% of its total imports, according to LSEG Oil Research data. China is the second-biggest buyer of Russian crude, taking 1.09 million bpd from the seaborne market and up to 1 million bpd from pipelines in 2024, according to LSEG. India takes mainly Russia's Urals grade, which is exported from ports in Europe, while China buys predominantly ESPO crude, which is shipped from Russia's far east. It's likely that India faces more difficulties in continuing the trade with Russia, given tankers loading at Russia's European ports have to pass through the waters controlled by countries imposing sanctions. The shorter sea voyage from Russia's far east to China will make it easier for China to continue buying ESPO crude, although vessel availability will be the major short-term challenge. The short-term impact of the new sanctions on Russia's crude exports are so far clear, a lift in the prices of Middle East crudes relative to other grades, and a squeeze on tanker rates and availability. IMPORT RISKS The longer-term implications are less clear. Firstly, it's likely that Russia's oil traders will once again find ways to work around the sanctions and keep crude flowing, even if they have to cut prices and trim margins in order to do so. But the biggest impact may be that both China and India pare back crude imports in coming months. China, the world's biggest oil importer, has a track record of easing back on imports if refiners deem that prices have risen too high, or too quickly. They can do this given ample stockpiles, and the current soft state of fuel consumption amid tepid economic growth. China's independent refiners may also choose to idle plants if their access to cheaper crude from Russia is limited. Many of these refiners are also facing higher costs of using alternatives, such as fuel oil, after Beijing cut rebates on consumption tax paid for feedstock imports. The situation is more complex for India's refiners, given their smaller inventories, but they may be tempted to cut processing rates if they can't source enough crude at competitive prices. Refining margins are under pressure from the recent surge in oil prices, which hasn't fully been reflected in product prices given the soft state of demand for fuels such as gasoline and diesel in many Asian countries. The refining margin for processing a barrel of Dubai crude at a typical Singapore refinery ended at $1.53 a barrel on Tuesday, up from the recent low of a loss of 3 cents on Jan. 21, but still well below the moving 365-day average of $4.46. The views expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/business/energy/russia-oil-sanctions-create-different-winners-different-times-russell-2025-01-29/
0 like
0 comment
0 share