UNITED STATES (VOP TODAY NEWS) — Oil trading companies Vitol and Unipec are sending about 700,000 tonnes of contaminated Russian oil to Asia in a bid to dispose of supplies rejected by buyers in Europe, according to trade and shipping data.
The Russian Drogba pipeline to Europe and the port of Ust Luga are contaminated with organic chloride, which can damage refining equipment. As a result, Russia was forced to cut exports in the worst disruption to supplies at all.
Traders said Vitol and Unipec were targeting mainly Chinese independent refineries, which have shown an interest in buying oil.
According to Reuters sources at Chinese refineries, they have recently been offered shipments of Ural ore, which contains 30-50 parts per million to 200 ppm organic chloride, without mentioning prices.
Buyers are cautious because contaminated Ural ore needs to be stored in tanks and diluted several times with clean oil to reduce organic chloride content so as not to damage refining equipment.
“The final price will be determined,” a trader at a major Chinese company told Reuters. (But) more quality checks are required. It is then possible to determine the price and how it is refined and whether it can be refined from the ground up.”
Organic chloride in crude oil can cause rust, corrosion and destroy refining units.
“I was offered 200-ppm barrels, and I said, ‘No thanks,'” a trader in Singapore said.
“The logistics are very difficult, only the major refineries can manage,” he said, adding that a shipment containing 200 ppm organic chloride needed to be mixed with 20 shipments of the same size, reducing the chloride content to the normal level of 10 parts per million.
For traders, valuing oil is the most difficult part because there is no similar trade precedent.
“Nobody knows what these barrels should be,” said a second trader. Will be deducted from the price of Brent for shipments destined for China certainly, but no one knows the amount of discount.
European traders said the contaminated cargo was offered at a discount of between $ 10 and $ 20 per barrel, but very few buyers showed interest. The Russian Urals are clean from the Baltic at $ 74 a barrel.
Currently, Asia supplies about half of the 1.5 million tonnes, or 11 million barrels, of contaminated Ural ore exported from the Baltic Sea port of Ost Loga in recent weeks.
Since European buyers rejected the quantities, most of them ended up in business.
An estimated 9 million more barrels are stuck in Drogba pipelines between Belarus and Germany.
Vitol and Sinopec, China’s parent company, declined to comment.
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