Russian diesel is and will continue to be in European tanks, despite the blockade on imports from Moscow, as authorities lack the tools to trace the origin of the fuel when transhipments have taken place.
At the same time, Russian crude Urals oil fell on the St. Petersburg commodity market to $57 per barrel, $3 below the cap imposed by the European Union.
As is known, the EU put in place a ban on Russian crude supplies from December 5 and will ban Russian oil products from February 5, 2023, as it seeks to deprive Russia of excess revenues from energy transactions. Britain ended imports of oil and petroleum products from December 5.
However, market sources pointed out to Reuters that the fact that the origin of the crude cannot be traced after refining and blending makes the scenario of quantities of Russian diesel being delivered to countries such as Turkey and India, and them exporting it, a likely scenario. Note that from the early days of the war Russia was selling oil at significant discounts to countries like India, Turkey and China, meaning that their refineries had very large profit margins on the finished products they produced.
Europe is looking to replenish up to 600,000 barrels per day after the Russian losses, according to Eugene Lindell, an analyst at consulting firm FGE.
The bad reputation that buying Russian fuel brings to suppliers, combined with the difficulty of securing cargoes, portends that limited quantities of Russian crude will be piped directly to Europe, only by some small market players.
Dutch customs, which oversees the important Amsterdam-Rotterdam-Ambersa trade and storage hub, British authorities and the International Commodity Exchange (ICE) will check the official certificates of origin of import ships.
In case of doubt, UK and Dutch customs may request additional documents to determine the origin of the goods, such as agreements, invoices or delivery notes from bills of lading.
ICE will also examine unloading certificates and proof from refineries of where the goods have been processed.
For any diesel to be accepted as being of non-Russian origin, Britain, the European Union and ICE require that it be substantially processed outside Russia.
Processing is considered substantial only if it results in the production of a new product or represents a significant stage of a process carried out in an establishment equipped for that purpose, the British government website says.
Blending Russian diesel in another country with a non-Russian equivalent would not change its origin. But refining Russian crude (Urals) into diesel - in another country - would.
The bill of lading game
Market sources note that it is virtually impossible to trace the origin of blended or refined diesel and difficult to track ship-to-ship (STS) transshipments, meaning that these aspects of the sanctions are largely dependent on the "goodwill" of market players, according to two oil industry sources who spoke to Reuters.
The volume of transshipments between tankers linked to Russia has increased dramatically since February, shipping data and analytics firm Windward said.
"If you were unloading Russian diesel at a 'looser' port, you could blend it and re-export it with a different bill of lading and a different origin," one of the sources, who deals with the storage and transportation of petroleum products, told Reuters.
Turkey's role
Russian diesel is likely to be delivered and re-exported from countries such as Turkey and India, market sources told Reuters.
Russia could use its ships to transport diesel to Turkey, where it can be shipped in medium-sized tankers, two industry sources said.
I could think of Turkey re-exporting the barrels or "dyeing" them domestically and shipping abroad larger quantities of its production, Kpler analyst Kevin Wright said.
Europe has already started to replace Russian diesel imports with refined product from the Middle East, but analysts expect India to refine more Russian crude and increase diesel exports to Europe.
The "shadow fleet"
The European cap prohibits shipping and insurance companies from handling cargoes of Russian crude unless they are sold at less than $60 a barrel. Despite strong reactions and threats from Russia, Russian crude , traded on the St. Petersburg Mercantile Exchange, lost 7.5% on December 6 , falling to $57.27 per barrel.
Despite the large difference in prices, Brent is trading at the level of 80 dollars per barrel and US WTI at the level of 75 dollars Many of the largest oil companies, including the "giants" BP and Shell, have themselves imposed sanctions on Russian oil and petroleum products.
Russia's decision to stop selling oil to countries or companies that respect the cap, combined with insurance difficulties, means that mainstream tanker owners will not be able to load Russian crude, French shipping brokerage BRS said.
However, smaller companies are already using shadow fleet tankers, making sure they sail with their GPS turned off, several industry sources said, adding that these have signed insurance contracts with providers in India.
BRS also notes that 111 aging tankers have been sold to private shipping companies since February, presumably to transport Russian oil.
Source.gr
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