Sources say that Western pressure will affect Asian purchases of Russian oil in December.
U.S.-European pressure on Asian buyers could limit India's oil purchases from December. This would lead to cheaper supplies in China. However, Japan is unlikely to stop its Sakhalin LNG shipments at this time, according to trade sources and analysts.
Washington has been exerting pressure through trade negotiations on China, India, and Japan to reduce their purchases Russian oil and LNG. Meanwhile, Britain just imposed sanctions against Chinese and Indian entities. The European Union may impose more sanctions. Western nations claim that Moscow uses its energy revenue to fund the Ukraine conflict.
These moves follow Russia's increased crude exports in October, as Ukrainian drone attacks against its refineries reduced oil processing. Data from analytics firm Kpler shows that China and India are likely to increase their seaborne imports in October to 3.1 million barrels a day, which is the highest level since June.
Muyu Muyu, senior oil analyst at Kpler, said that these imports will likely remain high until November due to the rapid increase in Russian exports.
She added that "However the sudden UK sanction on Chinese and Indian refineries - and the possibility of further measures from the EU, or even the U.S. - could prompt buyers to be more cautious when placing new order until further clarification is revealed."
INDIA CUTS NOT YET VISIBLE
An official from the White House said Thursday that Indian refiners have already cut their Russian oil imports in half. Indian sources say the reduction is not yet visible, but could show up in December or January import numbers. Multiple sources confirmed that refiners had placed orders for November loads, which included some cargoes due to arrive in December.
The consultancy FGE stated in a report that India cannot stop its Russian crude imports overnight, even though it may have agreed to. At least 700,000 barrels per day of India's Russian crude imports are on a long-term basis.
FGE analysts stated that the maximum amount of Russian crude flowing to India in the near future could be at risk is the 0.8-1,000,000 bpd spot volumes taken by Indian refiners. China may pick up some volumes that India has backed away from, as the Russian crude discount will increase.
In the meantime, Indian refiners are diversifying their purchases to mitigate any impact that a cut in Russian crude supply would have on them.
SANCTIONS ON NAYARA AND YULONG
Britain has imposed sanctions on India's Nayara Refinery, already suffering from EU sanctions, as well as on Yulong Petrochemical, a Chinese refiner that operates a 400,000-barrel per day refinery located in China's eastern Shandong Province.
Kpler's Xu stated that the UK government gave Yulong until 11/13/11 to complete any outstanding transactions. This will allow Yulong to handle Middle Eastern imports.
She added that it's not clear if Yulong could establish a new distribution chain to bypass the sanctions.
"The move is undoubtedly alarming for other Russian oil purchasers who may have overlooked sanctions by non-U.S. Authorities," Xu stated.
June Goh is a senior analyst for Sparta Commodities. She said that the UK sanctions will not have a significant impact on Yulong. However, the refiner may find it difficult to continue operations if both the EU and U.S. take the same approach.
Taiwan's Russian imports of naphtha are expected to drop after a group non-governmental organizations criticized the island's continuing business with Russia.
The traders claimed that the Russian refinery product exports have been capped due to Ukrainian attacks on Russian energy infrastructure and a partial Moscow ban on Russian gasoline and diesel.
JAPAN LNG Imports
Before Donald Trump's visit to Asia, the U.S. also asked Japan to stop Russian energy imports.
Tokyo and other G7 nations have agreed to phase out Russian crude oil imports as a response to Moscow's invasion of Ukraine in 2022. However, it is exempted from this requirement to continue to import LNG under long-term contracts.
Yuriy Huber, CEO of Tokyo's consultancy Yuri Group, warned that early termination would be subject to various penalties. He said that securing 6 million metric tonnes of LNG per year on the spot markets to replace Russian supplies would be difficult and "extremely expensive".
Kingo Hayashi of the Japan Federation of Electric Power Companies told reporters Friday that Russian LNG is an important source of stable supply for Japan. He added that Japanese utilities would like to continue using this gas.
Anne-Sophie Corbeau is a researcher with the Center on Global Energy Policy at Columbia University. She said that the U.S. must have a consistent policy on Russian LNG.
On the one hand, they pressure their allies to stop imports of Russian LNG or gas. She said that the U.S. has not implemented its own sanctions against Arctic LNG 2, a large-scale LNG plant in northern Siberia, which continues to deliver LNG to China even though it is under U.S. sanction. Reporting by Nidhi verma, New Delhi; Florence Tan, Chen Aizhu and Emily Chow in Singapore; Trixie Yap and Katya golubkova in Tokyo. Editing by Susan Fenton.
(source: Reuters)
