Under pressure from Western sanctions, Russia redirected more residual fuel oil to Asia and using ship-to-ship transfers to build larger cargoes for distant markets, a report said.

“Russia loaded more than 2.1 million metric tons (mt) of residual fuel, including fuel oil and vacuum gas oil (VGO), for Asia in October, a record volume,” according to the report Commodities at Sea from S&P Global Market Intelligence. Russia is the world’s top exporter of residual fuels.

“This accounted for 49% of all seaborne fuel oil and VGO exports from Russia. Comparatively, only 14.4% of Russian dirty product exports were destined for Asia during the first half of 2022,” it added.

The report said that the total Russian exports of fuel oil and VGO were level with September, totaling 4.35 million metric tons (mt).

Almost 1 million metric ton (mt) of fuel oil were shipped to Southeast Asia in October, the most since January 2019. Fuel oil shipments to India and China set to hit record highs in October.

“Nearly 690,000 mt of VGO and fuel oil cargoes loaded in October are expected to discharge via ship-to-ship (STS) transfer in the Mediterranean,” the report said.

Russian refinery processing is forecast to contract by 1.3 million barrels per day over 2022-2023 from 5.6 million in 2021, due to potential challenges to exports from sanctions and the upcoming European Union ban.

“Ahead of the European Union ban on Russian oil in the coming months, more fuel oil is heading to Asia. We have also observed an increase in ship-to-ship transfers in the last few months as cargoes are consolidated for longer journeys away from Europe, while market players face increased pressure from Western sanctions,” said Yen Ling Song, associate director at S&P Global Market Intelligence.
Source: Livemint