Where no one can see it, track it or find it. That is where Russian crude is headed. The buyers of this type of oil carry out their operations with great care in order to prevent their purchases from companies from a country that has started a bloody war in Ukraine from being known.
The market is still waiting to see if Russian companies such as Surgutneftegas proceed with monthly crude sales tenders this week. It is unlikely that clear and public offers will arrive, say the traders of oil. Instead, deeply discounted shipments will likely be traded privately, buyer-to-buyer, deal-by-deal.
Surgut normally kicks off crude trading with an offer to sell issued on the 14th or 15th of each month. No tender had been submitted as of Tuesday night in Singapore. The market is also waiting to see if Exxon Mobil will proceed with its monthly offers of Sokol spot crude, which it used to sell to buyers in North Asia.
It is still possible to buy Russian oil, but most in the market, including banks, shipping companies and refiners, self-sanction. That is expected to lead to the emergence of a two-tier sales structure: one official and the other submerged or clandestine, sources consulted by Bloomberg.
One section of the market will be highly visible, such as the offerings of some types of grades that S&P Global Commodity Insights and RIM Intelligence publish and track on official platforms, which are the ones showing the deep discounts (Ural oil is selling at a discount of 25 dollars with respect to Brent). At these prices, Russian oil is very attractive to all refiners.
However, there will also be another hidden part where alternative solutions and contracts are considered. Less visible methods of buying Russian oil could include open credit schemes, advance payments, and trading in yuan, rupees, or rubles. Some companies are also buying Russian oil in exchange for investments in the regions where they operate in order to have the physical capital needed to refine oil, for example.
India is looking for ways and alternatives that will allow it to continue buying Russian oil, according to government officials familiar with the matter. Chinese private refiners are also discussing ways to continue buying from traders and middlemen, in a bid to take advantage of much cheaper prices.
An almost global condemnation
Potential buyers are unwilling to suffer the same fate as Shell, which was forced to do a U-turn after its purchase of Russian oil and gas sparked widespread condemnation.
Those willing to buy Russian oil are not just trying to avoid reputational damage or penalties. They also have to navigate the financial markets looking for a lender since many banks have stopped lending money to finance the purchase of Russian goods and services. Payment and shipping are also problematicassure the tradersalthough the willingness of sellers to offer flexible payment terms can help overcome some difficulties.
A typical sales tender involves sending an email or fax to many potential buyers, specifying shipment volumes and dates. Offers are then sent and buyers are informed if they have been successful in their bids, while details about the gap between their offer and the final sale price can also be revealed. Interested traders will usually verify the deal with each other, often gathering details about the buyer and the price after a few checks.
On the other hand, oil affected by sanctions or restrictions tends to enter the market through so-called leaks. The cargoes can be loaded onto a ship that will subsequently perform a clandestine ship-to-ship transfer to hide the true origin of the crude.
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