Russia Sets Out Plan for Huge Exports of Flagship Urals Crude

(Bloomberg) -- Russia is aiming to ship the largest amount of its flagship Urals crude in almost three years next month, dangling a supply carrot to oil refineries in Europe who face $120-a-barrel prices if they keep spurning Moscow.

The country’s state pipeline company Transneft issued an export program to load 2.26 million barrels a day onto tankers from three western ports in April. That’s the highest since June 2019 and also a big jump from this month. 

However, there’s also a self-imposed buyers’ strike currently in place in Europe in response to the invasion of Ukraine. That raises a question over whether Asia will scoop up large amounts of deeply discounted oil that Europeans refuse to touch.

The issue of who will buy Russian oil has become pivotal since the invasion started in late February. If no other regions make up for lost European purchases, then that could affect the overall supply of crude globally. If, on the other hand, they do step in, then the main impact would be a rerouting of trade flows with a smaller effect on how much crude is available worldwide.

The huge April loading program caught traders by surprise as many had expected Russia might keep its exports steady or even trim them from March. 

A majority of refiners in Europe, home to more than 70% of Urals seaborne exports in normal times, are scaling back their purchases after the invasion. 

Asia Steps In

By contrast, Indian refiners have bought at least 8 million barrels of Urals mostly for April loading, according to data compiled by Bloomberg. Chinese firms are also discreetly purchasing cheap Russian crude, though most of them are oil that’s loaded at Russia’s eastern port of Kozmino. 

One Very Large Crude Carrier, or VLCC, with Urals crude is already en route to China. Another of the vessels is currently collecting crude from smaller ships at Skaw in Denmark. It is likely to sail to east after. 

Demand from Asia alone, however, looks insufficient to absorb all the barrels planned for April. That means Russia will see growing pressure to revise down its planned loadings, unless it can find enough tanks or ships to store the cargoes, according to traders.

Urals loadings for March are on course to reach 1.7 million barrels a day, according to port agent reports and ship-tracking data compiled by Bloomberg. The volume is about 5% less than originally planned. Many March cargoes were sold before the invasion. 

Separately, signs of a different source of supply disruption eased. Crude oil loading from the Caspian Pipeline Consortium link has partially resumed, according to an emailed statement from KMG International, a unit of Kazakhstan’s oil and gas company. 

©2022 Bloomberg L.P.