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European oil refineries are increasingly looking for Russian crude oil after the world’s largest raw materials producer is sending more volumes to China. The projections are that in the first five months of 2018 Russia will ship 19% less oil on its main ports in the Baltic Sea and the Black Sea compared to an year earlier. Meanwhile, flows to China grew by 43% in the first three months, according to data from Transneft.

This change is likely to force European refineries to look for a substitute of Russian oil varieties. Europe imports more crude oil from Russia than any other country, according to the ITC Trade Map. In all likelihood, the change will come from the Middle East, which cargo ships has so far been directed to Asia.

The oil flows from Middle East to Asia will shrink due to Russia, as a result of which the unused quantities will go to Europe.

So far, the cuts in Russian flows do not affect prices, thanks to exploitation in European refineries that convert oil into fuel. Russian Ural’s oil is traded on the Old Continent at prices close to its four-year high, thanks to this exploitation as well as an increase in US supplies.

The loss of Russian cargo, however, is felt in markets that are already pressed by oversupply of oil by sea and the OPEC cut of production that reduces the volume. So far in 2018, the cost of transporting Russian raw materials from the Black Sea port in Novorossiysk to the Mediterranean cost an average of less than 1 USD per barrel, which could make them the lowest since at least 2009.

The same is the picture when it comes to shipping cargo from the Black Sea, where is the Primorsk terminal, which is the largest facility for exporting crude oil to Russia.

This is not good for the long-term outlook of vessels in the region. If Russia sends more and more shiploads by pipes, not through ports, then with the restoration of the industry, this may be a segment of the trade in oil tankers, which is burdened by the fundamental change in demand.

China imports a major proportion of Russian oil through pipelines and shipments from the eastern ports of Kozmino, De-Kastri and Prigorodnoye.

The total volume of oil flows to China grew by 43% to about 750,000 barrels per day in the first quarter of the year, according to Transneft data. This raw material, which goes through Russian European ports – the bulk of which arrives in Europe – will reduce its volume by 19% to 1.86 million barrels per day in May.

With its increasingly intense flows to the east, the Russian oil will be replaced by a mix of Middle Eastern and American commodity. The US exports to all possible destinations have risen to a record 2.3 million barrels per day last week, with a full flow of shiploads expected in the coming months. This may be necessary to stimulate gasoline supply – a product that is usually produced by European refineries when demand reaches its peak in the summer.