Traders and refiners from at least nine Asian and European countries have approached the Middle East to ensure that its oil supply continues, and some of them even requested to increase the amount of crude oil they get from the Middle East
As crude oil supply from Russia is increasingly getting engulfed in uncertainties, refineries across the world are turning to the Middle East to ensure oil supply from OPEC countries and prevent any disruption.
As part of sanctions against Russia, the European Union will stop purchasing Russian oil imported from seaborne cargos. While Russia has been wooing Asian nations to export its crude oil, the West fears that Russian production is going to reduce after the embargo comes into effect. The uncertainty lies in the fact that unless the restriction comes into effect on December 5, its impact on the price and availability of crude oil can’t be gauged.
Traders and refiners from at least nine Asian and European countries have approached the Middle East to ensure that its oil supply continues, and some of them even requested to increase the amount of crude oil they get from the Middle East.
However, the problem is that the Saudi-led OPEC+ alliance has cut oil production. On the other hand, demand from Europe is going to increase. As a result, there will be many countries eyeing Middle Eastern energy, Whether Asian countries remain lucky enough to get a steady supply of Middle Eastern oil in the event of a total stop in the export of Russian oil. The competition for oil is going among Asia, and the West is going to get intensified.
The G7 countries are going to impose a price cap on Russian crude oil. However, the US has categorically said no such cap would be imposed on oil from OPEC countries. At what price level the cap will be imposed is not yet final. This uncertainty has forced traders and refiners to keep their options open.
Unlike spot buying of crude oil, in the case of term contracts, countries that buy oil have to come into a contract with the oil-producing country. The contract records how much the oil-buying country has to pay in the future to buy crude oil. It is reported that at least 5 Asian refiners and four European refiners and traders have just concluded a meeting that happens before a term deal.
On the other hand, India and China have been buying discounted Russian oil prices to ensure maximum availability of crude oil for their citizens – and that too at a lower cost. In fact, Russia has now overtaken Saudi Arabia to be the #2 crude oil exporters to India. China, too, has said that despite the price cap on Russian oil, its oil-buying habit will remain as it is.
The European Union currently buys 400,000 barrels of Russian diesel. Once this import stops in February, the value of Middle Eastern oil is further going to go up, which ultimately will result in sky-high fuel prices. All in all, the situation is going to get tricky in the coming months with all eyes on Middle Eastern crude oil. The spokesperson for Taiwan’s Formosa Petrochemical Corp, Lin Keh Yen, remarked, “If European countries start to lift crude from the Middle East, there will be more competition in the spot market.”