Page 6 - FSUOGM Week 21 2022

FSUOGM COMMENTARY FSUOGM

After all, many USGC refineries are set up to flows that would see additional volumes of US
handle heavy crudes of the type produced by oil moving into Europe.
Venezuela, and they have not been able to buy If so, it would probably be those extra barrels
from their former main supplier for the last few that helped the Continent overcome the disrup-
years. tions arising from the Russian war on Ukraine –
If Eni and Repsol (and eventually Chev- not Venezuelan production per se, but a shift in
ron, assuming that it is able to move past the global trade flows that involved both Venezue-
negotiation stage) started moving Venezuelan lan and US crude against a backdrop of contrib-
oil into the US market, they would not really uting factors. This shift is not likely to happen
displace any US oil production. As previously quickly, though, as Venezuela’s oil sector is still
mentioned, many USGC refineries are set up not in a position to make up for the loss of 20%
to process heavy sours rather than light sweets, of Russia exports to Europe – especially since
and most US barrels consist of light sweets. that number is likely to grow bigger as the EU
However, having extra supplies coming into the moves ahead with plans to reduce reliance on
USGC region might help support a shift in trade Russian energy. ™

Downstream impact

NewsBase examines some of the economic and political fallout from the

Russia-Ukraine war, with a focus on regional markets for jet fuel and diesel

RUSSIA’S policy toward Ukraine has had a These moves, in turn, have cut the volume of
huge impact on world oil markets over the last Russian oil available on world markets. More-
WHAT: six months. Prices began moving upward late over, they have disrupted trade flows, forcing
The reduction in Russian last year as Russian troops began gathering at Russian producers and traders to divert large
oil flows to world markets Ukraine’s border, and they have shot upward volumes of crude away from their usual destina-
has affected jet fuel and since the outbreak of war on February 24. tions in Europe to Asia or to take extraordinary
diesel prices, as well as This unprovoked invasion of a neighbouring measures to conceal the origin of their cargoes.
crude prices. country has led a number of Western countries These cuts and disruptions have not brought
to impose restrictions on the importation of Russian crude oil and gas condensate exports –
WHY: Russian oil, in an attempt to deprive the Kremlin which averaged 4.7mn barrels per day (bpd) in
Middle distillate prices of one of its most important sources of hard cur- 2021, according to the US Energy Information
seem to be under even
more pressure than rency. It has also led a number of private-sector Administration – down to zero, but they have
crude prices, and this organisations to spurn transactions involving reduced them.
pressure is evident in Russian crude, partly to avoid sanctions pen- The extent of the disruption probably
multiple regions. alties in some jurisdictions and partly to avoid amounts to no more than a few percent of global
being seen as willing to do business in a country liquids consumption, which the EIA has esti-
WHAT NEXT: with such an unsavoury reputation. mated at 97.4mn bpd in April 2022.
The EU’s planned embar-
go on Russian oil imports
has the potential to lead
to further disruptions in
trade flows.

Prices for oil have remained relatively stable compared to other energy sources (Saudi Arabia Ministry of Energy)

P6 www. NEWSBASE .com Week 21 25•May•2022