• Oil trader no longer deals with crude from OPEC+ producer: CEO

• Russia says won’t sell to those adhering to US-led price cap

Sharon Cho, Yongchang Chin and Jack Farchy, Bloomberg News

SINGAPORE/SHANGHAI/LONDON
EnergiesNet.com 11 23 2022

Top trader Vitol Group is still buying “very modest” volumes of Russian oil products and is studying whether the company will be able to keep doing so as more sanctions come into force.

The trading in Russian energy now makes up a “low-single digit percentage” of Vitol’s business, compared with 10% prior to the invasion of Ukraine, Chief Executive Officer Russell Hardy said in an interview. The company no longer deals with crude from the OPEC+ producer, only refined products.

Vitol would like to maintain a “very modest level of business, meaning a level that supports largely the asset footprint that we have,” Hardy said on the sidelines of the Financial Times Commodities Asia Summit in Singapore. The company buys Russian diesel to supply its business in Turkey, for example.

The European Union plans to implement sanctions on Russian crude from Dec. 5, with a US-led price cap on Moscow’s sales set to be activated alongside the penalties. The measure is designed to keep oil flowing but crimp Moscow’s revenue. Russia has said it won’t sell to those adhering to the limit.

Vitol handled 7.6 million barrels a day last year, making it the world’s largest independent oil trader. Still, Hardy said the ability to continue handling Russian products would depend on the price cap details, as well as political will.

“It depends on how politicians brief and talk to us and what they expect from us,” he said during a session at the summit. “They want us to comply with the price cap, but at the same time they want us to stay involved and keep the market supplied.”

Large western commodity traders like Vitol have to a large degree retreated from Russia since the war began, with smaller companies filling the gap. Hardy said that if the cap is set below the current market price for Russian crude, it would be difficult for big traders to continue handling it, accentuating the shift toward smaller players. 

Russia may omit pricing in oil contracts, making it difficult for companies to collate the necessary information to adhere to the cap, said Hardy. There may also be a disruptions to Russian flows as the nation’s shipping is stretched and smaller traders try to move larger volumes, he added.

“What we are not going to do as a company is breach any sanctions or load oil on a ship and breach price cap rules,” said Hardy. Russia has “logistics problems to solve and then they’ve got to find the customers for the oil as well, which I don’t think is likely to be so straightforward,” he added.

bloomberg.com 11 22 2022