Traders in Focus as Majors Bow Out of Russia

Most Western majors have slashed their purchases of Russian crude in response to the war in Ukraine, leaving large trading firms and a batch of smaller players as the primary buyers among a dwindling customer base.

As companies like Shell, BP and TotalEnergies zero out their purchases of Russian oil in the weeks and months ahead, big trading firms — some of which have been active in Russia since the mid-1990s — are still lifting Russian-origin crude and products from ports in the Baltics, Black Sea and eastern Russia.

But shipping data show that those volumes are starting to drop off as well as more oil is sold directly to end-users, especially in India and China, or via Russian-owned intermediaries in Switzerland and elsewhere.

For the heavyweight traders that have a global presence and are dependent on multibillion-dollar credit lines from Western banks, the risks of doing business in Russia will increase as the war drags on, multiple trading sources say.

"Of course, they will continue to lift Russian oil, but it will become harder for them to justify," a veteran Russian trader told Energy Intelligence. "You will probably see smaller operators enter the picture who have much less to lose."

Partnerships Tested

Volume-wise, the two most prolific independent marketers of Russian crude and products are Swiss colossus Vitol and Singapore-based Trafigura, which between them have been handling as much as 500,000 b/d, according to shipping and trading sources.

Both companies get the majority of their barrels from state-backed giant Rosneft.

Trafigura has been Rosneft’s strategic partner for more than eight years, during which time it has entered into multiple offtake deals. And in late 2020 it paid around $8.5 billion for a 10% stake in the Rosneft-led Vostok oil development in the Arctic.

Trafigura continues to lift Urals crude sourced from Rosneft from the Baltic port of Primorsk and Novorossiysk on the Black Sea, as well as Espo blend from the Kozmino terminal on Russia's Pacific Coast. But volumes have started to shrink over the past week, according to port data.

Vitol's alliance with Rosneft is more recent. Last autumn, it signed an oil offtake deal for volumes of around 180,000 barrels per day and, like Trafigura, it acquired a minority interest in Vostok Oil.

Neither Trafigura nor Vitol comment on their ongoing trading activities in Russia. But both companies have released statements condemning the violence against civilians in Ukraine, while stressing they have not entered into any business in Russia since hostilities began on Feb. 24.

Vitol and Trafigura are both silent partners in Vostok. Both leave all the day-to-day decisions to Rosneft and have no board representation.

Shrinking Exposure

Among the other big traders, Swiss duo Glencore and Gunvor — once among the leading Russian offtakers — have both shrunk their volumes to a fraction of what they once were.

Under its new CEO Gary Nagle, Glencore is also downscaling its Russian asset portfolio. It is in the process of offloading its 23.46% stake in producer Russneft, and had looked into shedding its two main Russian properties — a 0.57% stake in Rosneft and 10.55% slice of metals group En-plus — before deciding that there was no way of concluding a sale under current sanctions.

Gunvor, which was co-founded in the late 1990s by now-blacklisted Russian-Finnish billionaire Gennady Timchenko, still buys some barrels from Russian companies, such as Surgutneftegas. But since Timchenko sold his shares in 2014 to Gunvor's Swedish partner Torbjorn Tornqvist, the company’s footprint in Russia has shrunk.

Looking Elsewhere

There is also a group of smaller traders that continue to lift Russian crude and products on a regular basis. They include: Geneva-based Paramount Energy, which is set to lift around half-dozen Espo cargoes in April from small Russian producers; Swiss trader Petraco; Singapore-based Coral Energy; and Viennese player Cetracore.

Some Russian oil companies use trading subsidiaries in Europe that market most of their oil.

Giant Lukoil sells most of its barrels via its Geneva-based subsidiary Litasco, while Gazprom Neft has a trading arm in Vienna.

Rosneft has a Geneva-based marketing subsidiary, Energopole, which has played a relatively minor role so far but is now becoming more active, trading sources say.