What’s Keeping China From Buying More Russian Crude?

Russian oil outbound shipments have not shown signs of large decreases, because many analysts are feared last month. In fact, Russian crude oil delivery rebounded rebounded in the first full week of April to the highest level this year, the Bloomberg News tracker ‘Creade left the Russian port showing on Monday. However, the “buyer” attack in Europe with many majors refused to deal with Spot Russian cargo forcing Russian crude to make longer and complicated trips to achieve buyers who were willing in Asia. While China and India have no fun from Russian crude – which sells with large discounts that attract buyers who are sensitive to prices – logistics oil shipping from the Russian Black Sea and Baltic Port to Asia and tanker availability, and insurance for Russia, and cargo insurance Will limit the amount of oil that can be taken Asia and compensation for missing barrels that no longer occur to Europe, analysts said.

Because a large shift in the global trade route to accommodate more Russian oils go to Asia, the crude oil area that imports in the world will not be able to accommodate all of the European oil.

Shifting on the trade route has occurred.

Some of the previous volumes bound to the West will be replaced by Asia, but not all, analysts said. It was because of a two-month trip to Asia (and a four-month round trip) who would need a lot of supertankers not available in the global tanker market, said Zoltan Pozsar, short-term interest rates? Strategy on Credit Suisse.

Before the war, 1.3 million Russian oil BPD was sent from the Baltic Port Primorsk and UST Luga to Europe on Aframax operators, and this trip to Hamburg or Rotterdam needed one or two weeks to complete, Pozsar wrote in market comments in March in March 31 .

“If Russia now needs to move the same amount of oil as Europe but China, the first logistics problem facing it is that it cannot load Urals to VLCC in Primorsk or Ust Luga because the ports are not deep enough to dock VLCC. Russia first Must sail the Aframax vessel to the port for Raw STS transfer (raw-to -ship transfer) to VLCC, “Pozsar said.

STS transfers need weeks, and after the transfer is complete, the VLCC will sail two months east, discharge, and return to the Baltic, which is two more months.

“Conservatively, Russian crude traveled about one or two weeks before triggering economic activities (the time needed to sail the smaller Aframax operator than Primorsk to Hamburg) and now have to travel at least four months before triggering economic activities,” belongs to Credit Suisse . Pozsar note.

“Even worse, it’s not just time to market the worsening, but we also end up with a shortage of ships and a surge in shipping shipping rates,” he added.

According to OPEC analysis in the latest monthly oil market report published this week, “Tanker Market is widely influenced by uncertainty relating to the conflict in Eastern Europe, which is expected to affect trade patterns.”

“Aframax spot transportation rates around the Mediterranean rose more than 70% in March from the January level, while the tariff for SuezMax in the Atlantic basin is around 50% higher than the same period. Strength filtered to VLCC, increases the overall sentiment,” OPEC said.

The re-formation of Russian barrels is very attractive for buyers such as China and India because of a decent discount about ural. But distillers in China and India face challenges in taking too much Russian crude in the short term because of contractual obligations with Middle Eastern producers, according to Wood Mackenzie.

In addition, China has not shown too much appetite for Russian crude for several factors, Woodmac said. This includes expensive shipping for Russian cargo because of sanctions, challenges with payment and tanker insurance, the fact that warehouse travel multiplied time compared to the Middle East value goes to China, and a long-term contract refiners with a Middle East oil exporter.

Russia may still have buyers who are willing to oil in Asia, and buyers may not care about buying ethics to buy Russian crude oil, but they will definitely care about tanker and longer availability and availability.