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Russia had diverted most of its fuel oil and vacuum gasoil (VGO) exports to Asia and the Middle East even before the EU embargo on Russian petroleum products came into effect on February 5, according to data from traders and Refinitiv cited by Reuters.
Last month, the European Union took less than 5% of Russia’s fuel oil and VGO, with Greece, Latvia, and Italy importing small volumes of those products, according to the data.
Traders believe that these volumes could easily be redirected to other destinations, mostly in Asia.
India has emerged as a large buyer of Russian fuel oil in the past two months, according to trade flow data cited by Reuters.
Cargoes diverted to Asia and the Middle East have started to increasingly use ship-to-ship (STS) loadings and transfers, especially near Kalamata in Greece, Ceuta in Spain, and Skagen in Denmark.
In recent months, Russia’s fuel oil and VGO have been massively diverted to Singapore, Malaysia, China, South Korea, the United Arab Emirates, Turkey, and Senegal, per Refinitiv data.
The EU embargo on imports of refined petroleum products from Russia came into effect on Sunday, February 5. The embargo has been combined with price caps for deliveries to third countries, agreed upon with the G7 in the same way that the EU and the G7 coordinated the price cap on Russian crude last year. The EU has set a price cap of $100 per barrel on Russian diesel, meaning that buyers of diesel from third countries should either comply with the cap and buy the diesel at or below $100 a barrel or lose the insurance and finance services of Western companies for the cargoes.
Europe, for its part, has raised its imports of fuels from the Middle East and the United States in preparation for the EU ban, but just ahead of the embargo, Europe was still the biggest buyer of Russian diesel. The EU will have to boost imports from non-Russian suppliers significantly after the embargo kicked in on Sunday.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com