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Russian Oil Ban Creates Profit Opportunities For Traders In Singapore

  • A ban on Russian crude oil by the European Union and the US has led to a flood of cheap oil pouring into Singapore, where it is being blended and re-exported globally by traders. 
  • Singapore has yet to ban Russian oil or petroleum products, and its storage tanks are in high demand as traders look to capitalize on the influx of cheap Russian oil. 
  • Traders are reaping 20% profit margins by mixing and reselling cheap Russian oil in Singapore, which has become a hub for trade due to the ban in the West.
Singapore

A ban on Russian crude oil by the European Union and the US went into effect late last year, forcing Russia to find more buyers in the eastern part of the world. Besides China's and India's surging appetite for Russian crude imports, a flood of cheap oil is pouring into Singapore. It's being blended and then re-exported globally as traders reap huge profits. Recall that Russian energy products were sold to China and repackaged for European markets last summer. 

Before Russia invaded Ukraine, Europe was Moscow's largest crude and refined petroleum products customer. But those days are over as Western sanctions forced Russia to rejigger its energy supply chains towards the East. 

Moscow realized besides expanding pipelines to Asia and elsewhere, which could take years to develop infrastructure to increase flows, a fleet of shadow tankers would be its best bet to transport the oil. Now demand is soaring in Singapore for storage tanks as inexpensive Russian crude finds a home, according to Bloomberg

Tank space in the city-state is being snapped up due to a rise in interest and profits from mixing cheap fuel supplies from Russia with shipments from other sources, according to an executive from a tank operator and a consultant who advises traders on the matter. This process can help to obscure the cargoes' origins, they said.

Unlike many Western countries, Singapore has yet to ban Russian oil or petroleum products, although banks based in the country are prohibited from financing or dealing directly with Russian countries. 

In the coming weeks, Europe prepares to enforce new sanctions on Russian petroleum products, which will only increase Russia-to-Asia flows that will be pushed to hubs like ones in Singapore, mixing cheap Russian fuels with other sources for re-distribution globally. 

"We have observed an increase in the number of inquiries of short/spot-term storage in the period leading up to December," a spokesman for oil storage company Advario Asia Pacific said via e-mail.

Six-month leases for Singapore fuel oil or crude oil storage jumped by as much as 20% last year, according to local tank operator firms, including Advario, Jurong Port, Horizon, and Royal Vopak. 

Ship tracking data by Vortexa Ltd. showed oil-receiving terminals more than doubled volumes of Russian naphtha and fuel oil in December versus a year ago. Terminals received 2.6 million barrels of naphtha, nearly 40 times higher than the volume one year ago. 

Russian naphtha sitting in Singapore tank farms is being quickly re-exported to other Asia markets, according to Armaan Ashraf, global head of natural gas liquids at industry consultant FGE. 

William Tan, senior vice president of fuel consultancy Miyabi Industries, said Singapore tank farm storage is becoming very popular with traders taking in cheap Russian crude, blending it, and exporting it elsewhere for "very good" profit margins. He said traders are reaping 20% profit margins

Russia will need to expand its shadow fleet tankers as energy supply chains are rejiggered because of Western sanctions. Traders are capitalizing on these new trade flows. Still, the West has yet to cripple Russia but only bring forward a world where energy is traded in anything but dollars.  

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Leave a comment
  • Mamdouh Salameh on January 22 2023 said:
    Nonsense. Countries of the Asia-Pacific region and Asian oil traders are vying for Russian crude oil exports. Moreover, Russia won’t sell its crude oil at lower than market prices except to its loyal customers who receive preferential price for ignoring Western sanctions and the oil price cap.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Francisco Napoleao on January 23 2023 said:
    Markets tend to normalize specially in such a globalized world. Urals and other Russian oil products were normally cheaper than Brent or WTI, since the Russians prefered contracts to selling on the spot. The Russians lost most of the EU&#039;s market and went looking to other markets offering generous discounts, which are not so much of a discount as one might think. You see cheaper energy prices offer more competition. The EU&#039;s grow, specially German grow was financed by being able to get cheaper Russian oil and gas but also by having one of the most reliable energy supplier in the world. This was also possible because there was a certain infrastructure in place for that. The EU lost it all. Norway is obviously very reliable but they prefer to sell in the spot. Algeria and Azerbaijan are quite moody and have limited capacity. So selling at a discount to secure market quota in Asia they are ensuring future and creating lasting partnerships. This is what people don&#039;t see. The market opportunism we have witnessed is not more than that opportunism. Some guys in Singapore may be able to make some additional money now but that is peanuts. The EU is destabilising the energy market by stilling supplies form traditional suppliers to Asia, that makes Russia even more welcome. But one more infrastructure is put in place that is really bad news for the EU in the international markets. The world is splitting many, the question is might be seen from another perspective, where are the splitting forces coming from, that it might be the EU that is splitting from the World isolating itself. If fresh data December and January gave a gloomy image for Russia, more mature data in late January contradicts allot of was not more than wishful thinking.
    The swaps deals between Iran, Central Asian countries and Russia might be more relevant that a few smart deals at night be it in Singapore of at the Mediterranean.

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