Neighboring Europe and Russia: How did the Ukraine war change global oil trade routes forever?

The Russian war on Ukraine changed the global oil trade routes forever;

In one of the most significant redirects of oil flows in recent decades, Europe today is looking to withdraw increasing amounts of non-Russian crude, while Russia, a pariah in the West, is looking to the East to become its largest export market.

In a report published by Oilprice, writer Testana Paraskova said that the Russian war in Ukraine and sanctions from the United States, the United Kingdom and the European Union have upended the entire global oil supply chain, and now both Europe and Russia - the closest neighbors - are looking to each other geographically - by other means of import and export.

Changing Oil Paths

The author explains that changes in oil flows are already more visible 3 months after Russia's war on Ukraine;

Europe is now importing record amounts of US and North Sea crudes, and is attracting more barrels of crude from West Africa;

Their governments are trying to reduce their dependence on Russian oil, and eventually get rid of it completely.

Moreover, according to the author, UK and EU trading companies, insurance companies, reinsurers and tanker owners are avoiding dealing with Russian oil supplies, in compliance with current and future sanctions on Russian oil exports.

The writer added that the challenge facing Europe to cut its dependence on Russian oil became clearer last May, as the European Union took weeks to agree on a kind of settlement on the Russian oil embargo.

After the European Commission's initial proposal was to ban all imports of Russian oil by any means starting from the end of this year, it was eventually watered down to an agreement to ban seaborne imports by the end of the year with an exemption for imports via pipeline crude.

And the writer continued, saying that earlier last Tuesday, after the European Union reached an agreement to start banning Russian oil imports, European Council President Charles Michel said that the sixth package of EU sanctions against Russia would immediately affect 75% of Russian oil imports, By the end of this year, 90% of Russian oil imported into Europe will be banned.

Thus, this will lead to an increase in the global oil flow;

As Europe will seek more seaborne crude oil from outside Russia, which was the largest supplier of oil before the war, the embargo also means that Russia will have to redouble its efforts to sell more of its crude oil to Asia, primarily to China and India, in the absence of Its largest market, Europe, says the writer.

Europe is increasingly eyeing more oil supplies from the UK, Norwegian North Sea crude and the US (Shutterstock)

Europe looks to the West

The writer shows that, in order to replace Russian crude, Europe is increasingly looking to get more supplies from the UK, Norwegian North Sea and US crude and more barrels from West African producers.

She noted that ship tracking data compiled by Bloomberg showed that last April, the United States shipped the largest amount of crude to Europe since the United States lifted a ban on crude exports in 2016;

Europe imported about 1.45 million barrels per day of US crude in May, an increase of 15% compared to last March, according to Kepler, a data and analytics company.

Tanker tracker Petro Logistics also said Europe is also significantly increasing the amount of crude it imports from or through North Africa and from West Africa.

Moreover, Nigeria and Angola are boosting their exports to Europe, which has pushed Nigerian crude oil prices to record levels above that of Brent crude.

The increase in African crude sales in Europe comes at the expense of the decline in African sales in Asia (Reuters)

Russia looks to the east

The writer pointed out that the increase in African crude sales in Europe comes at the expense of the decline in African sales in Asia.

where India and China buy discounted Russian barrels of crude;

Asian buyers present Russia's opportunity to redirect its oil away from Europe.

Russian exports have headed to India and China to replace part of West African crude that is usually transported to India.

And Petro Logistics said - earlier this June - that India's total imports of crude oil jumped by 15% in April last year on an annual basis, and the company added that "there are significant increases from the Middle East at the expense of African barrels that went increasingly to Europe, and Russia is supplying India in record quantities.

In India, the writer says, cheap Russian crude oil attracts price-sensitive buyers to the point that Russia became India's fourth largest oil supplier last April, rising from the tenth place last March, and India is scheduled to import record quantities of Russian crude Last May and June this year, it was in the range of 24 and 28 million barrels, respectively, after it imported 7.2 million barrels last April, which is the previous record for imported Russian oil, according to Refinitiv Icon data, as quoted by Reuters. .

The writer also mentioned that the significant increase in India's purchases of Russian crude has caught the attention of the United States, which is said to have sent a federal government official to discuss US sanctions on Russia and try to persuade India to reduce its purchases of Russian oil.

Moreover, Russia exports nearly 400,000 barrels per day, mostly to Asia, via transfers from small ships to supertankers in the Mediterranean, according to Petro Logistics.

The writer concluded her report by emphasizing that even if Asia cannot completely replace all the oil exports that Russia will lose in Europe, Russian oil shipments to India and China are set to increase even more in the coming months, unless the West intervenes diplomatically to persuade India not to increase Russian imports more.

In any case, the writer says, crude oil trade flows have changed forever, as Europe looks to Africa and the United States, while Russia pins its hopes on India and China.