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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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World’s Largest Oil Trader To Completely Phase Out Russian Crude

  • Vitol to phase-out trading of Russian crude.
  • Vitol has long-term contracts with Rosneft until at least October this year.
  • The oil traders expects to completely abandon all trading activity involving Russian crude by the end of 2022.
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Commodity major Vitol plans to wind down its activities involving Russian crude oil by the end of the year, Bloomberg has reported, citing a spokesman for the company.

Trade with Russian oil "will diminish significantly in the second quarter as current term contractual obligations decline," the spokesman said, adding, "we anticipate this will be completed by end of 2022".

The report notes the announcement was made following an urge from the Ukrainian government addressed to the four major commodity traders to stop dealing in Russian oil, the revenues from which, the Ukrainian government says, are used to finance the war in Ukraine.

Vitol had previously signaled that it was planning to cease trade in Russian oil at some point. Yet it also needs to decide what to do with its stake in the giant Vostok oil project led by Rosneft.

Vitol, together with Mercantile & Maritime, bought a 5-percent in the Siberian megaproject before the pandemic. With reserves estimated at 2.6 billion tons of crude, equal to some 19 billion barrels, the group of fields that the Vostok Project spans could produce up to 100 million tons of crude annually once it reaches full capacity. Rosneft itself estimates the fields' reserves at up to 44 billion barrels. 

Now, with all the public pressure on businesses to exit Russia—and many already doing it—pressure may increase on private companies such as the commodity trading major, too.

Last month, unnamed sources told Reuters that Vitol has long-term contracts with Rosneft until at least October this year. Long-term contracts with private commodity traders are not normally made public.

Per that report, oil traders expected both Vitol and fellow commodity major Trafigura to continue trading Russian crude this month and next, although perhaps in lower volumes "given the potential difficulties in selling the cargoes to EU buyers."

The European Union has been discussing a potential oil embargo on Russia for weeks now, but the only thing that seems to have been established is that if one is ever agreed, it would be a gradual wind-down of imports rather than a sudden suspension.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on April 13 2022 said:
    The profit motive is the core of capitalism while greed is an integral part of human beings. Put the two together and we will get hundreds of oil traders to replace Vitol.

    As for Vitol’s and Mercantile & Maritime 5% investment in the giant Vostok oil Project in Siberia led by Rosneft, it wont’s fare better than BP’s almost 20% stake in Rosneft. BP’s withdrawal from Russia is expected to cost it an estimated $25 bn. Similarly Vitol will sustain a multibillion loss.

    Vitol will be abandoning oil reserves in the Vostok project estimated at 44 billion barrels. To put this wealth in context, it is almost as big as Libya’s proven reserves.

    Other than the loss of reserves, Vitol like BP and Shell before it won’t be able to sell its stake to non-Russian entities. In effect, its assets will all be bought by both the Russian government and Russian oil and gas giants on the cheap.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Lee James on April 14 2022 said:
    It is kind of amazing how far governments and major businesses are willing to go to do the morally correct thing: starve the Putin war machine. I will be interested to see how this plays out for these governments and businesses. Being good public and corporate citizens is worth something though the exact return is difficult to measure.

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