Singapore/New Delhi:
Chinese and Indian refiners are scouring the world for crude supplies as new U.S. sanctions on Russian producers and tankers limit shipments to Moscow's key customers, traders said.
The US Treasury Department on Friday imposed sanctions on Russian oil producers Gazprom Neft and Surgutneftegas, as well as 183 ships that have shipped Russian oil, as it targets revenues Moscow has used to finance its war with Ukraine.
Many of the tankers have been used to ship oil to India and China as Western sanctions and a price ceiling imposed by the Group of Seven countries in 2022 shifted Russian oil trade from Europe to Asia. Some tankers have also shipped oil from Iran, which is also under sanctions.
On Monday, China reiterated its opposition to unilateral US sanctions.
The measures have disrupted trade in sanctioned oil, pushing Chinese and Indian refiners back to sellers of non-sanctioned oil, tightening supply and driving up spot premiums for Middle Eastern crude as far away as Africa and Brazil. said traders.
Over the weekend, China's new refiner Yulong Petrochemical bought 4 million barrels of Abu Dhabi crude from Upper Zakum in February and March from Totsa, the trading arm of French energy giant TotalEnergies, traders said.
The cargo is destined for the 400,000 barrels per day refinery complex in Yantai, eastern Shandong province, which began trial operations in September.
Yulong, which previously bought Russian ESPO Blend crude, has bought Angolan and Brazilian crude in recent weeks, traders said, and is now in talks to buy more oil from West Africa and Canada.
The refinery bought 2 million barrels of Angolan Girassol and Nemba crude and also 2 million barrels of Brazilian Buzios and Tupi crude, they said.
The sources declined to be named because they were not authorized to speak to the media. Yulong and Totsa generally do not comment on commercial deals.
Indian refiners that bought crude from the Middle East last week before the sanctions were announced are still looking for more cargoes, more traders said.
India's Bharat Petroleum Corp Ltd bought two million barrels of Oman crude oil from Totsa in a tender last week, two people familiar with the matter said.
The strength of demand is helping Totsa offload a surplus of Middle Eastern crude after accumulating cargoes through S&P Global Platts' trading platform over the past four months, traders said.
Global Brent crude futures rose above $81 a barrel in Monday trading, hitting their highest since August.
Spot premiums for Middle Eastern benchmarks rose more than 70% to around $3 a barrel on Monday, traders said, reaching their highest level since October 2023.
Premiums for sweet grades have also risen, with Brazilian crude for March delivery trading at premiums of more than $3 a barrel to Brent last week, about $2 higher than early December levels, one of the traders said.
“The biggest disruptions will be in shipping,” said a trade executive involved in Russia's oil sector, adding that complications could arise if a ship is owned or operated by companies involved in the operations of sanctioned tankers.
The market is likely to see a growing number of intermediaries marketing oil from sanctioned producers, Gazprom Neft and Surgutneftegaz, while more Chinese yuan payments will be made through China's Cross-border Interbank Payment System (CIPS), the executive said power.
Also included in Friday's sanctions document were two Chinese oil logistics companies – Shandong United Energy Pipeline Transportation Co Ltd and Guangrao Lianhe Energy Pipeline Conveyor Co – both based in eastern China's Shandong province, a refinery hub and China's top destination for sanctioned oil.
Since these companies mainly transport oil from storage tanks to domestic refineries with payments in Chinese yuan, the sanction would have little impact, the trade director added.
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