Right oil prices going to drop with Russian oil off the market and Biden administration war on oil. lol
Transneft, the Russian oil pipeline operator, has informed local oil companies that it would be capping the intake of yet-to-be-sold crude because of full storage as buyers in the West shun Russian oil, Reuters reported on Tuesday, quoting sources with knowledge of the plan.
While Russian oil flows are not currently embargoed in Europe, many buyers—including international oil majors—are steering clear of Russia’s crude and oil products. The Western companies are concerned over future embargoes and/or sanctions or have already pledged not to buy Russian oil as a “self-sanctioning” precaution amid public pressure to stop financing Vladimir Putin’s war in Ukraine.
It now appears that the buyers’ reluctance to purchase Russian spot cargoes, at least buyers in the West, has resulted in a full Transneft storage system, and the pipeline network operator of Russia has imposed caps on the amount of oil it would take. The limits on flows are mostly imposed on oil that has yet to find customers, two of Reuters’ sources said.
Over the past few weeks, Russian companies have failed to award cargoes in spot tenders several times as no one in Europe was bidding despite the hefty discount of the flagship Russian grade Urals to Dated Brent, which has widened to $30 per barrel recently.
Russia has issued a Urals loading program for April, which shows Moscow is planning for a huge increase in Urals cargoes next month, Bloomberg reported last week. Russia’s plans are for a significant jump in exports of Urals. However, it remains to be seen whether China and India—unfazed by the sanctions on Russia and taking advantage of the discounted cargoes—would be able to absorb all the unwanted Russian oil that typically heads to the West.
Shipments of Russian oil averaged around 3.63 million barrels per day (bpd) between March 17 and 23, down by 26.4 percent compared to the previous week, Bloomberg reported on Monday, citing industry data.
Russia will have to shut in some of its oil production as it will be unable to sell all the volumes displaced from European markets to other regions, with Russian crude production falling and staying depressed for at least the next three years, Standard Chartered said earlier this month.
By Tsvetana Paraskova for Oilprice.com