The world’s leading oil trader stops importing goods from Russia
According to Bloomberg news, the world’s leading oil trading group, Vitol Group, will stop trading oil products from Russia from the end of this year. In addition, the company will also stop participating in any new oil transactions involving Russia.
Specifically, a spokesman for Vitol emailed to Bloomberg saying that they will significantly reduce Russian oil transactions in the second quarter of 2022 when the term contract obligations are almost completed. The group will also cease trading crude oil from Russia unless otherwise instructed, and this will be completed by the end of 2022.
In fact, Vitol has been under quite a lot of pressure since the Ukraine conflict took place because many term contracts are signed in the context of undelivered goods (Oil forward contracts or futures contracts are traded before upon delivery due to the time of exploitation and transportation).
Vitol’s statement came after an aide to Ukrainian President Volodymyr Zelenskiy wrote a letter to the company’s board of directors and other oil traders.
Immediately after the Ukraine conflict broke out, many countries announced to stop importing Russian oil such as the US, UK, Canada or Australia. A series of large corporations such as Shell, Total Energies or Neste have received the call to stop trading Russian oil. In addition, a series of banks, shipping companies or insurance companies also followed to avoid being affected by Western sanctions.
This boycott has caused the price of Russian oil to plunge, currently $ 34 / barrel lower than the international Brent oil price.
The International Energy Agency (IEA) has estimated that Russia’s oil production will decrease by 1.5 million barrels per day by April 2022. This will be 3 million bpd in May 2022 as many buyers turn away.
However, cheap Russian oil is causing many businesses in India and Russia to buy.
“While many buyers from Asia increased their purchases of Russian oil because of the discount, other older buyers decreased,” the IEA said.
In 2021, Vitol’s revenue increased by 100% to $279 billion as global oil demand rebounded as economies reopened. On average, Vitol trades about 7.6 million barrels of crude oil per day in 2021. This is much higher than Russia’s 4.7 million barrels of oil exports per day in 2021.
According to CNN, it is likely that the European Union (EU) will ban Russian oil. Last week, European Commission President Ursula von der Leyen announced that she was considering banning Russian oil in the next round of sanctions.
The rejection of Russian oil could further increase international oil prices as buyers have to find alternative sources of supply. IEA data shows that Russia is the world’s second largest oil exporter after Saudi Arabia, accounting for about 14% of global oil supply in 2021.
International Brent oil price once crossed the threshold of 139 USD/barrel in early March, a 14-year high, but then fell to only 107 USD/barrel.
*Source: CNN, Bloomberg
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