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SINGAPORE, Sept 26 (Reuters) – Russian oil is expected to flow to Asia and the Middle East, while refined fuel produced in those regions will flow to the West as global oil trade is disrupted by sanctions, said Vitol chief executive Russell Hardy. In Monday.
The Russian-Ukrainian war has made energy security the top issue for governments as they battle inflation, and with the impending ban on Russian oil and cuts in gas supplies from Moscow to Europe, policymakers set sustainability concerns aside for now.
“Energy security is number one. Price is number two. Sustainability is number three,” Hardy said of top near-term priorities.
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More than a million barrels a day of U.S. crude should flow to Europe to fill Russian supply gap, he told a forum at the 38th annual Asia Pacific conference Petroleum Conference (APPEC) 2022, adding that Russian commodities are expected to find a home outside the UK, US and EU.
“He’s going to travel longer and longer distances and find different markets, and in doing so he’s going to have to trade at a discount,” Hardy said.
“You’re starting to see that with fuel coming in from the east that would otherwise have stayed in Europe, and fuel from the east going west to cover the shortfall.”
The EU is set to ban Russian crude oil from December in a bid to starve the Kremlin of revenue, following Moscow’s invasion of Ukraine.
Imports of Russian crude oil into the EU and the UK last fell to 1.7 million barrels per day (bpd) in August, from 2.6 million bpd in January, according to data from the IEA, although the EU is still the largest market for Russian crude. Read more
The IEA also predicted that the United States could soon overtake Russia as the main supplier of crude oil to the EU and the United Kingdom combined.
REQUIRED LNG INFRASTRUCTURE
Russia’s gas supply cuts have put enormous pressure on the European market, with high gas prices expected to affect 60-80% of demand, Hardy said.
Europe will also need more infrastructure for the discharge of liquefied natural gas (LNG), as the continent’s infrastructure is “essentially full”, he added.
“We’re going to need more supply but the slots are bigger right now because the need is immediate,” Hardy said.
Global gas prices have hit record highs this year as Russia cut supplies to Europe while oil prices hit multi-year highs in March.
Brent futures have eased in recent weeks on fears that the recession will reduce demand, but are expected to hit $100 again due to tight supply when European Union sanctions on Russian oil drop. implemented in December and February.
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Written by Emily Chow; Editing by Jacqueline Wong
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