April 3, 2023 [Financial Times] – Trafigura and Vitol bosses say they would increase activity if governments and banks give approval

Commodity traders Trafigura and Vitol have said they would consider trading more Russian oil this year if they received clear guidance that governments and banks would accept them doing so.

The world’s two largest independent energy traders both wound down their large oil businesses with Russia following President Vladimir Putin’s invasion of Ukraine last year.

Trafigura chief executive Jeremy Weir said his company’s position was “under review” but would only change if there was broad-based agreement from banks, insurance companies and western governments that major traders needed to re-engage to facilitate the smooth and safe movement of Russian oil.

“You have to have all stakeholders involved to do this thing properly and professionally, and have buy-in,” Weir told the Financial Times’ commodities global summit in Lausanne.

Trafigura currently lifted only a “limited” number of cargoes of refined products, permitted under exemptions in the west’s sanctions, having completely stopped trading Russian crude last year, he added.

Russell Hardy, Vitol chief executive, said the company was in full compliance with the west’s restrictions and currently traded less than 100,000 barrels a day of Russian oil.

“Is that number going to move up marginally in the event of some slightly stronger guidance towards what’s expected? Yes, maybe,” he said. “Is it going to dramatically change? I don’t think so.”

The chief executives’ comments come as the US government has begun to privately urge some large trading companies to restart activity with Russia if they can do it under the G7’s $60 a barrel cap. Russia’s Urals blend, its main benchmark, is currently trading at $49.95, according to Refinitiv data.

Western officials are increasingly concerned that the sanctions have inadvertently moved the Russian oil trade from better-known companies to lesser-known operators, often using ageing vessels.

“The larger, more experienced companies have removed themselves [and], generally speaking, the newer more skilled shipowners removed themselves,” said Ben Luckock, Trafigura’s co-head of oil trading.

Companies that were “arguably less experienced, certainly less transparent” had filled the gap and were now taking Russian oil on old boats through difficult shipping channels such as the Danish straits, all the way to Asia, he added.

“I hope there isn’t a problem because it is going to very quickly focus people’s minds.”

Torbjörn Törnqvist, chief executive of energy trader Gunvor, said that many of the vessels carrying Russian oil had previously been “heading towards the scrap yard” and cautioned that the quality of the non-western insurance many of the shipments were probably using may not prove effective in the event of an accident.

He said Gunvor would not “exclude” the possibility of trading more Russian oil “but you obviously have to be 100 per cent sure about the compliance questions around this and it’s very complicated”.

Traders at the FT conference said they broadly expected oil prices to rise in the second half of this year, with many predicting the recent sell-off triggered by the issues in the banking sector would only make the oil market more bullish after the summer should drillers lower investment.

Brent crude, the global benchmark, was trading at $74.40 per barrel on Tuesday while West Texas Intermediate, the US equivalent, was at $68.38.

Luckock said he expected oil prices to get into the “high $80s” by the end of the summer while Gunvor co-head of trading, Stephane Degenne, said he expected prices to be in the $90s towards the end of the year.

The most bullish forecast was from hedge fund manager Pierre Andurand, who reiterated his prediction that oil prices would soar as high as $140 a barrel later this year, driven by rising demand in China as its economy reopens.
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