Citing a company spokesperson, Bloomberg reported that major commodities company Vitol plans to end its activities related to Russian crude oil by the end of the year.
The spokesman said that trade with Russian oil “will shrink significantly in the second quarter with the decline in current contractual obligations,” adding, “We expect this to be completed by the end of 2022.”
The report notes that the announcement followed a call from the Ukrainian government to the four major commodity traders to stop dealing in Russian oil, the proceeds of which, as the Ukrainian government says, are used to fund the war in Ukraine.
Vitol had previously indicated that it plans to halt trade in Russian oil at some point. However, it also has to decide what to do with its stake in the giant oil project Vostok, led by Rosneft.
Vitol, along with Mercantile & Maritime, bought 5 percent of the Siberian mega-project before the pandemic. With estimated reserves of 2.6 billion tons of crude, equivalent to about 19 billion barrels, the range of fields spanned by the Vostok project can produce up to 100 million tons of crude annually once it reaches full capacity. Rosneft itself estimates the reserves of the fields at up to 44 billion barrels.
Now, with all the public pressure on companies to get out of Russia – and many are already doing so – the pressure on private companies such as commodity trading may increase as well.
Last month, unnamed sources told Reuters that Vitol has long-term contracts with Rosneft until at least October this year. Long-term contracts with private commodity traders are not usually advertised.
According to that report, oil traders expected both Vitol and its major commodity colleague Trafigura to continue trading Russian crude this month and next, although perhaps in smaller quantities “given the potential difficulties in selling shipments to buyers in the European Union.”
The European Union has been discussing a possible oil embargo on Russia for weeks, but the one thing that appears to have been imposed is that if at all agreed, it would be a gradual cooling of imports rather than an abrupt suspension.
By Irina Slough for Oilprice.com
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