New, small oil trading companies are replacing the commodity majors that are suspending their business relations with Russia amid Western sanctions against Moscow.
Bloomberg reports that there are some legacy traders still exporting Russian crude, as well as several smaller players and a few new entrants into the field. The biggest Russian oil trader right now is Lukoil's Litasco, based in Switzerland, which exported at least 14 million barrels of Russian crude last month and some 8.6 million barrels since the start of May.
In Asia, too, the big commodity traders are giving way to other companies when it comes to handling Russian oil. While not officially sanctioned by anyone but the United States and the UK, Russian oil has become toxic because of other sanctions that target Russia's financial and shipping industries. So the actual consumers of the oil are stepping in, at least in China.
According to the Bloomberg report, one Chinese port company dubbed Shandong Port Group recently hired a tanker to ship Russian ESPO crude to China. The company has close ties to Chinese private refiners. The tanker, Kriti Future, sails under a Greek flag and departed the Far East Russian port of Kozmino on May 9. It arrived at the port of Quingdao yesterday.
What all these developments show is that there is still very much a market for Russian oil despite the sanctions. Thanks to these alternative traders, crude can still get to buyers, alleviating what could have been a potentially devastating blow to many businesses, given the size of Russia's oil and fuel exports.
"Mainstay traders -- including state-owned ones -- have announced very public drop-dead dates to stop trading Russian oil this month and that comes well after many shipping companies have moved away from the trade," the head of tanker research at Braemar ACM Shipbroking told Bloomberg.
"If there is an all-out EU ban, then Russian oil trade will have to become more private, while some of those cheap barrels will continue flowing into limited outlets in Asia," Anoop Singh also said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
Despite Western sanctions, major international oil traders continue to do business with Russia via small oil trading companies and a few new entrants into the field.
There is no replacement for Russian oil exports now and for the foreseeable future. Therefore, Russian oil will continue to reach customers in order to keep the global economy ticking. Neither Western sanctions nor lies by the International Energy Agency (IEA) can stop it reaching the market.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London