As expectations for a prompt resolution to supply issues in the Middle East wane, Asian refiners are acting earlier than normal to acquire crude oil from Russia’s Far East.
As the U.S. temporary waiver on Russian oil is about to expire and expectations for a prompt resolution to Middle Eastern supply issues wane, Asian refiners are acting earlier than normal to get crude oil from Russia’s Far East.
A month before to loading, cargoes of Eastern Siberia-Pacific Ocean blended crude oil—a light, sweet Russian grade shipped to Asia-Pacific markets from the Kozmino terminal in the Far East—are often traded. However, trading has begun early as refiners scramble to fill supply gaps because the Strait of Hormuz is essentially closed, according to Kpler.
According to Muyu Xu, senior oil analyst at the data source, “the unusually early start to Russian crude trading highlights the urgency among Asian refiners to acquire supplies as hopes for a rapid resumption of Middle Eastern flows recede.”
In an attempt to increase supply and lessen pressure on petroleum prices, the United States said earlier this month that it would temporarily permit nations to buy Russian oil that was already at sea. The waiver is valid until April 11th.
According to Kpler data, Indian refiners promptly bought large amounts of Russian Urals crude and some Russian Far East barrels for arrivals in March and April after the U.S. gave its approval. Other Asian purchasers, such as Sinopec, a state-owned refiner in China, have taken early action to secure shipments for May.
According to Xu, “prompt Russian crude supply is tightening, with floating storage reducing quickly and most May cargoes presumably already contracted.” According to Kpler, Russia’s exports are currently at over 3.9 million barrels per day in March, up from 3.2 million barrels per day in February.
Far East crude premiums are sharply rising due to strong Asian demand, particularly from China and India, but the grade is still reasonably priced compared to other sources. Although precise pricing is yet unknown, Kpler stated that prices for May cargoes are now projected to be about $10 per barrel more than Brent oil.
