Discount Strategy Has Limits for Russian Products

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Deep discounts have helped Russia keep its crude exports flowing at lofty levels, but can it do the same with its refined products after the EU's embargo takes effect on Feb. 5? India and China, the big buyers of Russian crude, are net exporters of products, so who else could take the 1.4 million barrels a day of Russian products that went to Europe last year? Alternative markets — namely Turkey, Africa and Latin America — have so far shown limited interest in taking Russian products. Assuming the clean tankers can be found, Turkey, North Africa, Latin America and the Mideast could take Russian products though. The issue is that overall product demand in many of these markets is small. Only Turkey and Egypt have large diesel markets, with demand of about 350,000 b/d and 300,000 b/d, respectively. West Africa wants gasoline primarily. Brazil imports 200,000 b/d of diesel, with more than half coming from the nearby US. That said, shipping analysts say that Russian products will follow the path of least resistance, as confirmed by higher volumes going to nearby North Africa recently. There, Russian products imports rose from an average 51,000 b/d in 2022 to 243,000 b/d last month. Sources say Russia is also lobbying hard for overland routes to Central Asia, Pakistan, Iran and North Korea — cutting vessels out of the equation. But this is a pricey alternative.

Oil Trade, Sanctions, Oil Prices, Crude Oil, Oil Products, Oil Tankers, Ukraine Crisis
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