The logistics problems getting Russian oil to China are monumental. From Tsvetana Paraskova at oilprice.com:
- Russia is offering deep discounts for its crude following a wave of sanctions on its energy industry.
- While China and India are still buying some discounted oil, logistical hurdles are becoming increasingly difficult to navigate.
- Contractual obligations and shipping constraints are posing major problems for would-be-buyers of Russian oil.
Outbound shipments of Russian oil have yet to show signs of a major decline, as many analysts feared last month. In fact, Russia’s shipments of crude oil rebounded in the first full week of April to the highest level so far this year, Bloomberg News’ tracker of crude leaving Russian ports showed on Monday. Yet, a “buyers’ strike” in Europe with many majors refusing to deal with Russian spot cargoes is forcing Russian crude to make much longer and complicated voyages to reach willing buyers in Asia. While China and India are not shying away from Russian crude—which sells at hefty discounts attracting price-sensitive buyers—the logistics of shipping oil from Russia’s Black Sea and Baltic ports to Asia and the scarce tanker availability, bank guarantees, and insurance for Russian cargoes would limit the amount of oil that Asia could take and compensate for lost barrels that are no longer going to Europe, analysts say.