In a surprise move in May, a Liberia-flagged oil tanker, dancing on Russia’s Ust-Luga port waters, loomed large with 100,000 tonnes of Urals crude oil. The oil was not for the heavyweight oil companies but on behalf of an obscure Hong Kong-based trading company – Guron Trading. But why and how? The unfolding story of a rampant rise of shadowy trading houses facilitating Russia’s crude exports to Asia may leave you astounded.
The Emergence of Unsung Oil Traders
Recent months have seen an explosion in the number of obscure trading companies that are extending Moscow’s reach in Asian oil markets. The reason? Major oil firms and commodity houses have shied away from transacting with Russian producers post-sanctions imposed due to the Ukraine war. As a result, at least 40 intermediaries, many of which have no experience in the field whatsoever, entered the scene between March and June this year.
These newly established players have juggled at least half of Russia’s total crude and refined product exports, which on average, amount to 6-8 million barrels per day. This surge has led these relatively unknown firms to join the ranks of the world’s biggest oil traders.
A Major Transformation in Russian Oil Trading Landscape
Companies started appearing on the scene after Russia invaded Ukraine in February 2022, with up to 30 intermediaries engaging in trade. A stark shift from the conventional system where well-known oil majors like BP, Shell, and top trading houses such as Vitol, Glencore, Trafigura, and Gunvor dominated Russian oil and product trading for decades. However, there is no evidence suggesting these trades are breaking sanctions.
But this recent change could make things complex for European and US agencies enforcing sanctions. Tracking Russian oil transactions and prices could be like finding a needle in a haystack, more so when Urals prices soar above the designated cap of $60 a barrel on Russian exports.
Trading at Sea: A Rising Trend
With the sudden appearance of these new companies comes an increased frequency of at-sea trades. The goal, it seems, is to put a veil over Russia’s oil exports. At times, a single cargo can be tossed between at least three traders, a marked shift from the previous model where a renowned trader stage-managed the transaction from source to destination.
These new trading companies also coincide with a growing market for aged oil tankers, facilitated by newly formed companies to ferry Russian oil that Western shippers are giving a wide berth.
## An Increase in Financial Risks and A New Export High
While this sudden boom in business spells profits for some, it also stirs up financial risks for Russian oil companies. They find themselves dealing with unfamiliar entities that have scarce credit history. Some companies, such as Coral Energy and Everest Energy, made a swift entry and exit into Russian oil trading, attributing their decision to strategic factors related to their companies.
Despite these perils, Russian oil exports from all seaports reached a remarkable multi-year high in April and May, nearing 4 million bpd. Largely powered by this new network, oil supplies to India soared to a record 1.95 million bpd in May, while China imported a whopping 2.29 million bpd.
Despite the unprecedented sea of change, only Lukoil continues to market oil through its trading division – Litasco, which recently shifted its base to Dubai from Geneva. Still, players like Petroruss, Guron Trading, Bellatrix Energy, Covart Energy, Voliton, Demex Trading, Nestor Trading, Orion Energy, and Patera are making waves, sparking concerns about potential delays and non-payments. The future may be uncertain, but for now, Russian oil export appears to thrive under these new and unexpected alliances.
