Page 4 - DMEA Week 29 2022

DMEA COMMENTARY DMEA

Middle East cargoes

easing Europe’s strain

Crude and product shipments from the Middle East are easing
the strain on European refiners as Russian volumes head East.

MIDDLE EAST AS the European Union closes in on a formal Alexandria – so far in July, nearly double the level
embargo on purchases of Russian oil, concerns of the same month last year.
have turned to identifying possible replacements Saudi Arabia accounts for the bulk of the
WHAT: for these cargoes. piped volumes, with Iraq also increasing
Oil flows to Europe from With the Middle East being home to the supplies.
the Middle East have shot majority of the world’s proven oil reserves, the Meanwhile the latter has also been raising
up as Russian volumes region’s top producers have been called on to the number of cargoes it sends towards Europe
head to Asia. raise upstream output. through the Suez Canal.
While these calls have largely fallen on deaf The pipeline’s total daily average has risen to
WHY: ears, Saudi Arabia and Iraq have diverted exist- 1.09mn bpd, all of which is destined for Europe,
Self-imposed restrictions ing production towards Europe, expanding the highest volume since April 2020. Middle
on the purchase of inter-regional trade as Russian crude is snapped Eastern countries – mainly Iraq – have also been
Russian oil are shifting up by China and India at discounted rates on sending around 1.2mn bpd of cargoes to Europe
trade dynamics. account of the former’s limited market. through Suez, giving a rough total of 2.2mn
Further downstream, a new refinery in bpd of crude trade. This would represent a 90%
WHAT NEXT: Kuwait is set to begin marketing new supplies increase compared to January, before the conflict
Refined product of low and very low sulphur fuel oil (LSFO and in Ukraine began.
shipments are likely VLSFO) ahead of next year’s ban on buying Rus- Meanwhile, Russian crude is going in the
to grow in the months sian refined products. opposite direction via ports in the Baltic and the
ahead as the EU moves to Black Sea, supplying China and India at heavily
restrict Russian supplies SuMed supplies discounted prices, in a major, though likely tem-
further downstream. According to vessel-tracking data compiled porary, shift in global oil trade dynamics. This is
by Bloomberg, more than 1mn barrels per day in sharp contrast to the gas market, with Euro-
(bpd) of Middle Eastern oil has been transported pean countries unable to secure enough LNG
via the SuMed pipeline – that runs across Egypt from Gulf suppliers to displace Russian flows
from the port of Ain Sokhna on the Red Sea to owing to existing contracts, mainly with Asian

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