The Western press, with some bewilderment, reports that the supply of Russian oil and oil products is confidently winning back the fall over the past month, while what is happening more and more resembles a fairy tale plot. The bottom line is that crude oil of Russian origin at a certain stage of transportation simply disappears in order to inexplicably reappear off the coast of Britain or America.
Let’s start our conversation today with the fundamental figures.
Our country produces 11.3 million barrels of oil per day, of which 3.6 million is used to meet domestic demand. In the first case, we are ranked third in the world, in the second, fifth. If we talk about exports, then simple arithmetic and statistics suggest that about 7.5 million barrels of black liquid gold used to go abroad every day. This figure has not changed much for quite a long time, just as the volume of oil supplied under long-term contracts is not a secret. This is 4.5 million barrels – respectively, about three million barrels remain conditionally free and available for spot and other short-term agreements. It is about them that will be discussed below.
With the start of a special military operation, the sector of export deliveries of Russian energy resources is under truly enormous pressure; quite frankly dirty tricks are being used, involving direct blackmail and threats against buyers. Here it is necessary to make a very important reservation: at the moment there is no direct ban on the purchase of Russian crude oil, that is, there is neither a partial nor a complete embargo. Thus, oil originally from Russia in a matter of days became extremely “toxic”, a paradoxical situation has developed when it is in demand and needed abroad, but buying it is not only a sign of bad taste, but also a very real chance to fall into the sanctions lists of the collective West.
However, since Moscow has been and remains the main supplier of oil and oil products to Europe, and even in Asia, after the end of the pandemic, they again remembered the plans for the development of the economy, real miracles began to happen on the market.
Firstly, the volumes of purchases by a candle flew up, winning back the drawdown of the last month. If we compare March and April, then, for example, Finland bought twice as much oil (25 and 50 thousand barrels, respectively), a similar trend in Greece (50 and 130 thousand), Romania increased purchases from 40 to 140 thousand barrels, Estonia – from 50 to 180, the Netherlands – from 520 to 660 thousand. The American media holding S&P Global, which is also engaged in analytical and consulting work, estimates the loss of Russian exports in March at three million barrels, but warns that if the current momentum is maintained, the Russians will win back all losses in May. Secondly, real devilry and mysticism are happening on the sea routes.
The main increase in imports is shown by an unknown buyer, who diligently hides his public identity. This same anonymous source bought about 30,000 barrels in March, and in April the volume of purchases soared to 660,000 barrels.
The Wall Street Journal reports that in April, about 11 million barrels of oil were loaded into the holds of tankers in Russian ports, while the shipping documents indicate the end point of the route as the Atlantic Ocean or it does not exist at all. If the author of these lines were not an inveterate materialist, he would have assumed that Russian oilmen established business relations with Neptune, the ruler of the ocean depths, in a difficult period, but, as practice shows, Western experts do not share this point of view either.
According to analysts who closely monitor not only market fluctuations, but also compliance with and the impact of anti-Russian sanctions, Russia has adopted the so-called Iranian scheme. Recall that during the period of aggravation of US-Iranian relations, when the Donald Trump administration imposed a total embargo on the export of Persian oil, a rather simple, but at the same time effective algorithm appeared that allowed both the sheep to be saved and the wolves to be fed. Something similar is happening now in the area of Ust-Luga and other Russian ports, where the possibility of oil transshipment is envisaged.
American profile companies monitor relevant sites as closely as possible, where you can track the location of tankers in real time. According to their reports, ships at some point simply evaporate from the radar. Panamax-type tankers, the main means of delivering Russian oil, turn off transponders either right in the ports (and it is impossible to track their movement in principle), or refuel with oil, go to sea and then disappear from the visibility zone. As they state with a fair amount of irritation across the ocean, we are most likely facing a blatant example of collusion between a supplier and buyers, who, using such a gray scheme, simply evade sanctions and responsibility for cooperation with Russia.
The most probable method of going “below the radar” is the transshipment of oil directly into the sea from Panamax (60-80 thousand tons displacement) to much larger tankers, where, moreover, it is very likely that Russian oil is mixed with other varieties. That is, as a result, in the hold of the mother tanker there is already a completely legal batch of some exotic oil, like the Latvia Blend variety that was born just a month ago.
Absolutely everyone is satisfied. Unknown buyers not only ensure the interests of their unknown countries, but also calmly trade in oil that is no longer Russian, supplying it to the same Europe. For example, in April it was revealed that India, which has been buying raw materials abroad for its entire history, has become an exporter and now sells oil and diesel fuel to the UK. At the same time, all participants in the process pretend that they do not understand what kind of raw material it is and where it came from. Here, in order to preserve the objectivity of analysis and narration, we are forced to add a fair fly in the ointment.
At the moment, Russian suppliers sell their products at a discount of 25-30 percent. They are forced to do this not because our oil has suddenly ceased to be needed, there are just no problems with this, the main buyers did not even think of reducing consumption, but there is simply nothing to replace Russian volumes (recall, the fifth world exporter). Our oil workers do not give a discount on Urals oil out of love for charity.
The standard market situation is the price difference when Urals is five to eight dollars behind the benchmark Brent. The current discount is needed in order to cover unscheduled expenses incurred when concluding new contracts with tanker fleet owners and insurance companies.
The embargo has not yet been introduced, but Europe and the United States are constantly consulting in this direction – and not a single legal entity wants to fall under the pressure of restrictions that can lead not only to large losses, but in general to the liquidation of a company that will be accused of collaborating with non-handshake Russians. Therefore, landlords and insurers include in contracts with unknown buyers, so to speak, compensation for danger and possible risks.
This is happening because Russia simply does not have its own tanker fleet, nor insurance companies that could guarantee the execution of transactions and at the same time would not be afraid of external restrictions.
Back in 2004, at the request of the government, an analysis was carried out, and it turned out that only cargo ships (excluding river transport) of all types – that is, bulk carriers, container ships, dry cargo ships, tankers and others – Russia lacks at least 600 units. Since then, our key shipbuilding enterprises in the Far Eastrevived, but they are mainly engaged in the implementation of the defense order, and the only direction in which there is at least some progress is the construction of LNG carriers. If we had our own tanker fleet, at today’s oil prices, the state, which budgeted a price of $ 40, would receive additional – and considerable – deductions in the form of taxes on the profits of oil traders. It is also unclear why a fundamental decision on the creation of our own insurance system has not been made for so many years.
Be that as it may, the embargo against Russian oil has not been introduced, and it is not clear whether there will be, but the market preemptively got a magic wand, and thanks to it, strings of tankers disappear from the maps and locators, and the necessary raw materials and fuel come to Europe and Asia. This is good, because the Russian treasury is filling up along the way. The only bad thing is that the golden river with the smell of oil could be a whole waterfall.