The European Union could now ban the import and transit of fuel oil from Russia around six months ahead of the planned deadline, an EU official and four traders told Reuters, as quoted by Banchero costa in its latest weekly market report.
Banchero costa further noted, the EU has been reducing imports of Russian refined oil products since March, and agreed a full ban from February 2023. However, the import and transit of Russian coal is being stopped sooner, from August, and fuel oil could now be classified under the same rules as coal.
Aside from being the second largest seaborne exporter of crude oil in the world after Saudi Arabia, Russia also hosts a very significant refining industry, and is a major exporter of refined petroleum products.
According to Banchero costa’s weekly report, the Russian refineries tend to be relatively old and of simple designs, at least when compared with more modern and complex plants in countries like India, China, and Saudi Arabia. Therefore, they produce relatively large quantities of spare fuel oil from each barrel of processed crude oil.
The above makes Russia the world’s largest net exporter of fuel oil. In the 12 months of 2021, Russia exported 51.8 mln tonnes of fuel oil, based on Refinitiv vessel tracking data. This amounted to 18 percent of global seaborne fuel oil trade last year.
Banchero costa also said, the European Union technically exported more fuel oil, 62.4 mln tonnes in 2021, but almost half of this, 24.1 mln tonnes in 2021, was intra-European cabotage from hubs such as Rotterdam.
Globally, seaborne fuel oil trade in 2021 rebounded to 282.5 mln tonnes, up +8.3% y-o-y, but this followed a-13.3% y-o-y decline in 2020, a -7.3%
y-o-y decline in 2019, and a -9.1% y-o-y decline in 2018.
Banchero costa weekly report also noted, Fuel oil production and trade have been declining for years, as refineries are upgraded to maximize higher value clean products output, and its use for power generation and other non- bunker purposes is being reduced.
In the first 6 months of 2022, global fuel oil trade declined by -7.0% y-o-y to 122.5 mln tonnes, with export volumes increasing by +6.7% y-o-y from the Arabian Gulf and by +9.1% y-o-y from the USA, but declining by -12.4% y-o-y from the EU.
Total fuel oil loadings from Russia, according to Banchero costa weekly report, in the first 6 months of 2022 were down by -12.8% y-o-y to 23.0 million tonnes. The biggest drop in exports from Russia this year has been to the USA, with volumes down by -67.7% y-o-y in Jan-Jun 2022 to 2.1 mln tonnes, from 6.4 mln tonnes in 1H 2021.
On the other hand, Banchero costa said, volumes to the Arabian Gulf have surged by +65.6% y- o-y in 1H 2022 to 2.3 mln tonnes, from 1.4 mln tonnes in 1H 2021. Most of these have been to the hub of Fujairah, but a large share of it have ultimately ended in Saudi Arabia to feed power stations to meet summer cooling demand and free up the kingdom’s own crude for export.
Volumes from Russia to the European Union have also in increased in 1H 2022, by +7.8% y-o-y to 12.9 mln tonnes, from 11.9 mln t in 1H 2021. However, here it also get’s complicated. Shipments from Russia to Greece have surged by +237% y-o-y to 4.0 mln t in 1H 2022 from 1.2 mln t in 1H 2021, as Russia uses Greece’ Kalamata port as a trans-shipment hub.
Traders said the fuel oil is being stored and blended offshore on board tankers and being loaded via ship-to-ship transfer for re-export.
About 14% of fuel oil shipped from Russian ports in 1H 2022 was loaded in Suezmaxes, 50% in Aframaxes/LR2, 3% in Panamaxes/LR1, and 32% in MR or smaller tonnage.
Suezmax tonnage is used for shipments from the Black Sea or Baltic Sea to the USA, the UAE, and Malaysia and Singapore. Aframax tonnage is used about half for North America delivery and half for European delivery.
MR and smaller tonnage is used either for Black Sea/Baltic Sea shipments to Europe or for Slavyanka/Nakhodka/ Vanino to China/Korea/Malaysia.
In terms of loading ports, in 1H 2022 about 10.2 mln tonnes (about 44%) of fuel oil were shipped from Russia’s Black Sea ports.
In 1H 2022, about 11.2 mln tonnes (about 49%) of fuel oil were shipped from Russia’s Baltic Sea ports. In 2021, about 1.5 mln tonnes of fuel oil (about 7%) were shipped from Russia’s Far East ports.
- Banchero costa -
