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Trade of Far East Russia's Sokol crude resurfaces after 4 months

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Trade of Far East Russia's Sokol crude resurfaces after 4 months

Highlights

BPCL buys 700,000 barrels for September loading

Asian buyers seek alternatives amid limited production

Trade in the Far East Russian Sokol crude grade has resurfaced in September after nearly four months' absence after spot liquidity for the once-popular medium sweet grade disappeared as buyers shunned imports from Russia and a key operator of the oil field pulled out.

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A September-loading cargo of the grade is set to be shipped to India, with state-owned Bharat Petroleum Corp. Ltd., or BPCL, heard to have fixed a vessel to lift 700,000 barrels for its Mumbai refinery, according to traders and ship tracking data.

Once rare, shipments of Far East Russian crude to India have become a common feature in the market, given that other North Asian refiners continue to abstain from buying Russian crude, while Chinese demand continues to be tepid. India is now also a major buyer of Russian grades such as Urals that have been diverted away from Europe due to sanctions.

This is the first Sokol cargo in recent months, according to traders.

Price levels for the cargoes weren't immediately available but were heard to be heavily discounted to make the shipment economical to India.

A Singapore-based crude oil trader pegged Sokol crude value for November-loading barrels at a discount of around $5/b to Platts Dubai on a delivered North Asia basis. The valuation estimates are largely driven by trade in Far East Russian ESPO crude, a much larger stream of crude that continues to see an active spot market for cargoes heading mainly to China but also increasingly to India.

"Compared with ESPO, Sokol's quality is better and [sometimes] their buyers can be the same. Sokol's production hasn't really resumed, still [at a] very low production level," said the trader.

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BPCL was heard to have chartered the vessel Yuri Senkevich, owned by Russia's largest shipping company, Sovcomflot, to ship Sokol cargo from South Korea to India for $3.3 million, according to sources.

BPCL declined to comment on the matter.

limited supply

Availability of Sokol has shrunk sharply with output at Sakhalin-1 plunging to 10,000 barrels/day from the normal 220,000 barrels/d, according to sources.

Since May, only a single shipment carrying Sokol crude was observed to have left De Kastri terminal on eastern Russia's Sakhalin Island on May 4, the loading port for Sokol crude. The shipment was destined for Dalian, China on May 13, ship tracking data showed.

ExxonMobil's Russian subsidiary Exxon Neftegas, which was the operator for the Sakhalin-1 field, declared force majeure for its Sakhalin 1 project in end-April due to "recent events that hinder, delay or prevent Exxon Neftegas Ltd. from complying with its obligations under the agreements and from conducting operations at the required level of international standards for marine and petroleum industries," a spokesperson told S&P Global Commodity Insights.

In March, India's stated-owned Oil and Natural Gas Corporation, or ONGC, failed to sell its May-loading Sokol crude cargo after buyers turned cautious toward buying Russian oil shortly after the Russia-Ukraine war broke out.

There have been no spot sell tenders heard for Sokol crude since then, according to sources. ONGC could not be reached for immediate comments.

Nevertheless, some buyers in Asia have also found comfort with light sour and sweet crudes from other origins, which could substitute Sokol crude as their refinery feedstock.

"Usual buyers of Sokol such as South Korea are taking light sour Murban and other ADNOC grades. Kimanis and WTI Midland can also replace Sokol," said another crude oil trader.