Russia Offers Oil in a Rush, Hinting at Longer-Term Trade Impact

(Bloomberg) — Russia’s state oil producing giant Rosneft PJSC surprised traders in Europe and Asia with offers to sell large amounts of crude at speed, as well as setting out significant changes to the payment process for at least some of the cargoes.

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The move is another sign of disruption to some of the firm’s operations following Russia’s invasion of Ukraine. There has been a growing pressure in Europe to place an embargo on Russian oil, creating a potential impetus to get purchases finalized before any such step is taken.

The firm offered as much as 37.4 million barrels of the nation’s flagship Urals oil for sale from Russia’s western ports for loading in May and June, a tender document seen by Bloomberg shows. That works out at about 40% of its daily seaborne exports of the crude last year. It separately offered 11 prompt cargoes of other grades for loading from the east of the country, according to traders.

Both east and west sales are relatively immediate by the standards of the oil market, and traders in both regions said such large and short-term offers were an unusual departure for Rosneft from its usual way of doing business.

The terms of the sale of Urals, the nation’s top export grade, stipulate that buyers could in theory pay in dollars, euros, Chinese yuan, Turkish Lira or the UAE’s dirham, although Rosneft’s preference is rubles. That suggests one of the concerns roiling the gas market — Moscow’s insistence on payment in its domestic currency — may not afflict oil just yet.

Rosneft is seeking 100% pre-payment on the provisional value of any Urals cargoes, something that may be complicated by the fact that the invoice amount will have to be converted from dollars to rubles but other currencies will then be acceptable if necessary. It is also offering as much as 320,000 tons of Siberian Light, another grade that gets shipped from western ports.

The European Commission is working on a sixth sanctions package that could include restrictions on some oil imports and goods, a person familiar with the work said last week, but member states including Germany, Austria and Hungary have expressed reservations on a full embargo. Even then, it’s unlikely the commission will present anything concrete until after the second round of the French election on April 24, two separate officials said.

In Asia, Rosneft offered eight shipments of ESPO crude for loading in May to a small group of potential buyers via a tender, according to traders who asked not to be identified. It also offered three shipments of Sokol.

Rosneft typically supplies its Asian crude to international traders, which then sell that oil to buyers across Northeast Asia, but the war in Ukraine has prompted many companies to rethink their dealings with Russia.

Vitol Group — the world’s top independent oil trader — said recently that it intends to stop trading Russian-origin crude and oil products by the end of this year.

ESPO is loaded at Russia’s eastern port of Kozmino and is a favored grade of Chinese refiners, while Sokol is loaded from the De-Kastri terminal in the Russian Far East. India and China have been willing buyers of Russian crude, while some other countries and companies have stepped back.

All the tenders close on Thursday.