Breaking News
Investing Pro 0
🚨 NDVA surged 43%. This AI Chipmaker Could Be Next See Analysis

Post-War European Oil Matrix Looks More Diversified, Yet More Expensive

By Ellen Wald, PhDCommoditiesMar 23, 2023 21:30
au.investing.com/analysis/postwar-european-oil-matrix-looks-more-diversified-yet-more-expensive-200555673
Post-War European Oil Matrix Looks More Diversified, Yet More Expensive
By Ellen Wald, PhD   |  Mar 23, 2023 21:30
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
LCO
+2.85%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
+2.52%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Europe has diversified crude oil sources, albeit at a higher cost
  • Saudi Arabia and the U.S. have become more important crude oil suppliers
  • Russian-made diesel imports have also dropped significantly, with Saudis filling the gap

I have previously addressed how the sanctions on Russian crude oil and Russian petroleum products are changing oil markets here and here. These analyses have mostly focused on the new markets that Russia has opened for its oil exports.

Today's column will examine how Europe's oil imports have changed since the sanctions and some of the potential geopolitical implications of this. Traders should be aware of how crude oil and diesel flows are shifting and how markets are reacting to these changes.

In 2021, one-quarter of the EU's oil imports came from Russia. This included both seaborne imports and imports via the Druzhba pipeline. 10% came from Norway, 9% from the United States, 8% from Kazakhstan, 8% from Libya, 7% from Iraq, and 5% from Saudi Arabia and the United Kingdom. The remaining 16% came from a variety of other producers in increments smaller than 5%.

Since sanctions were implemented, the EU has diversified its sources of oil significantly. In the third quarter of 2022, Russia only supplied 15% of Europe's crude oil needs. Notably, imports from the U.S. increased to 12%, and Saudi Arabian oil increased to 9%. Most other imports remained about the same, although the "others" category increased to 24%.

Although Europe's sources of crude oil are now more diverse, which is beneficial for energy security, they come from much farther away. This makes the oil more expensive for European importers.

The United States and Saudi Arabia have become more significant players in Europe's crude oil market, making Europe more vulnerable to shifts in U.S. drilling and energy policy and more vulnerable to changes in OPEC policy. U.S. supply could decline in 2023 because U.S. crude oil exports in 2021 and 2022 were buoyed by releases from the Strategic Petroleum Reserve (SPR).

Additional releases are unlikely at this point. The only way Europe may be able to increase its imports from the U.S. is if a bill proposed by Senator Marco Rubio to ban U.S. oil exports to China is voted and signed into law. Right now, this doesn't seem likely, but if U.S. sentiment against China continues to grow, the potential to ban oil exports to China also grows.

Because U.S. oil exports to Europe have risen, U.S. oil exports to Canada have declined. Canada used to be the top destination for U.S. oil exports since 2015, when the oil export ban was lifted. Now, Canada has dropped to 4th place.

This isn't necessarily a negative development, but geopolitical relationships can also change whenever trade balances shift. Europe is now more vulnerable to political and military concerns in the Middle East and is now more dependent on the U.S. for crude oil.

When it comes to diesel, European imports of Russian-made diesel have dropped significantly since sanctions were implemented in 2023. In 2021, Russian diesel made up 27% of European diesel imports.

It has now dropped to 2%. Imports of diesel from Saudi Arabia have increased tremendously to fill the gap from Russia. Imports of Saudi diesel to northwest Europe increased to 202,000 bpd in February 2023. Imports from China and South Korea, which had previously not supplied much diesel to Europe, also grew, as did imports from India.

It is highly likely that the crude oil used to produce this diesel probably originated in Russia as Saudi Arabia, UAE, China, India, Indonesia, and Turkey are all importing Russian crude oil and refining it into products that they are subsequently selling to Europe and other countries that are no longer buying Russian crude oil.

This is acceptable according to the sanctions policy, and traders can expect this industry - refining Russian oil for sale to Europe and the U.S. - to grow since it does not appear that the sanctions on Russia will be removed in the near future.

***

Disclosure: The author currently does not own any of the securities mentioned in this article.

Enroll Here!
Enroll Here!

Post-War European Oil Matrix Looks More Diversified, Yet More Expensive
 

Related Articles

Gary Tanashian
Gold Miners Are on Schedule By Gary Tanashian - May 27, 2023

The gold and silver Commitments of Traders indicated a potential for a coming decline in gold, silver and the gold miners. A correction, not the end of the bull phase by this...

Post-War European Oil Matrix Looks More Diversified, Yet More Expensive

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email