Russia's oil exports to Europe dips as fuel quality on offer deteriorate

Russia has exported less crude oil to Europe this year as the quality of the fuel on offer deteriorated and tense diplomatic relations prompted it to redirect more volumes to China.

Russia increased oil pipeline exports to China by almost 50 per cent in January-April from a year earlier to 12.4 million tonnes, Igor Dyomin, a spokesman for Transneft, Russia’s oil pipeline monopoly, said on Tuesday. Moscow has embarked on a so-called “pivot East” strategy and tried to boost ties with Asia as its relations with the West have chilled over Russia’s role in Ukraine’s conflict and its alleged meddling in the US presidential election in 2016. 

The increase in oil supplies to China has resulted in a worsening quality of Europe-bound Urals blend, including an increase of unwanted sulphur content. “The decrease in purchasing volumes happened as the countries want to get oil with sulphur content of 1.5 per  cent, though the sulphur content is capped at 1.8 per cent in the contract,” Dyomin said.

Dyomin said that Hungary, Slovakia and Poland cut Russian oil imports by around 10 per cent in January-April, and shipments to Europe via the two branches of the Soviet-built Druzhba pipeline declined by 225,000 tonnes to 15.75 million tonnes in the first fourth months of the year.

“The decrease in purchasing volumes happened as the countries want to get oil with sulphur content of 1.5 per  cent, though the sulphur content is capped at 1.8 per cent in the contract,” Dyomin said, adding the figure stands at 1.75 per cent now.

According to Reuters calculation, the sulphur content in Urals as of February had increased on average by 0.15 per cent from 2017. There are no legal consequences for Urals’ quality falling below the standards, but it has dampened its price and prompted buyers to think about the possibility of reducing the volumes they buy, according to traders and sources close to European refineries.