Russia-China oil deals may change global energy run

RUSSIA, the world’s largest crude producer, is shying away from Europe – as far as crude supplies are concerned – ramping up instead supplies to China. And as the process gains pace, new alliances are springing up on the global energy chessboard while the old ones are being discarded. The small, yet, strategic shift in target markets is providing Moscow not only with an opportunity to end its reliance on weak, saturated and somewhat fragmented European markets, but is also a major source of instant, handy cash at a time of great need. And the swap ensures Beijing long-term supply security. A win-win situation on more than one count!

Russian state-controlled oil company Rosneft will supply China with 365 million tons of oil over 25 years under a $270 billion deal, Igor Sechin, its chief executive said on Friday. A day earlier, Russian President Vladimir Putin said Rosneft planned to sign a deal to provide China with oil worth $60 billion. Russian business daily Vedomosti later said Putin was referring to an advance payment that Rosneft would receive.

Moscow already supplies Beijing with 15 million tons (300,000 barrels per day) of oil annually via the pipeline. Russia now has plans to increase oil supplies to China by 13 percent in July to September from the previous three months, a shipping schedule obtained by Reuters showed. Rosneft agreed in March to triple supplies to China. It did not specify over what period, but it planned to increase deliveries by 800,000 tons this year on top of the 15 million tons (300,000 barrels per day) it already supplies annually.

While the overall volume of Russia’s oil output has remained level, sales to Europe has been down the slope. “Russia has been losing its interest in Europe where oil consumption is stagnant. It’s looking increasingly to the East,” Valery Nesterov, analyst from Sberbank CIB, has been quoted as saying.

Even a modest shift could have a significant effect on Europe, raising prices across the region. European consumers, who had been used for decades to buying Russia’s, export blend Urals, at a steep discount to benchmark Brent prices, now, have to live with a gradual strengthening of prices for the blend. Consequently over the past few years, Urals has repeatedly traded at a premium to Brent.

Full article: Russia-China oil deals may change global energy run (Saudi Gazette)

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