Profits from a single transaction soared by 33 times. Small oil traders made a fortune after the Russian-Ukrainian conflict!

Smaller oil traders have taken their place in Russia after commodity trading giants such as Glencore and Trafigura announced their withdrawal from Russia, connecting the Russian crude trade to the international market.

The current price of Russian Urals crude is just below $91 a barrel, while Brent is around $119.50 per barrel as of press time and WTI is around $118.50 per barrel. The spread between Urals and the latter two is as high as nearly $30 a barrel.

The involvement of small traders provides opportunities for Russian crude oil exports. Before the embargo came into effect, Russia could still export 3.6 million barrels a day of crude oil by sea, and such transactions did not violate previous EU sanctions.

According to media reports, each batch of crude oil trade by small traders will create a profit of up to 20 million US dollars for them, while before the Russian-Ukrainian conflict, their trade profit from transporting a batch of goods was only 600,000 US dollars. The complicated trading environment brought them 33 times the profit margin.

EU ban, short-term business is in vain

However, the founder of Paramount Energy & Commodities, a small oil trader, said, “All of these transactions happened before the sanctions were imposed and stopped immediately after the sanctions started.”

Late on the night of May 30, local time, EU leaders reached an agreement at an EU summit to partially ban Russian oil imports. The ban will cover seaborne oil purchases, which means that about two-thirds of European crude oil imports from Russia will be restricted. In addition, Germany and Poland have pledged to stop importing oil through the Druzhba pipeline in the short term, and the coverage of the Russian oil ban is expected to reach 90% by the end of this year.

Previously, analysts believed that Russian stone production would fall by 3 million barrels per day in the second half of 2022. In mid-May, Russia's oil output fell 830,000 barrels a day from February, while the share of idle wells at Rosneft, its largest producer and refiner, rose to 30% in April from 17% at the start of the year. Analysts say this will permanently erode some of Russia's spare capacity.

Daria Melnik, senior analyst at Rystad Energy, said: “The main factor driving Russian companies to ramp up production is the increased volume of their oil that can be exported and processed domestically.”

Now, with the EU oil ban in full swing, there is also no possibility for small oil traders to conduct intermediate trader transactions between Russian oil and European buyers without evading sanctions.

In this regard, Russian Deputy Prime Minister Alexander Novak said that he will continue to find a new balance and find new export opportunities, including re-finding new markets and building new supply chains.

For small oil traders, though, the lack of European buyers doesn't mean they can't make deals; they made enough profits in the frenzy of the first three months of the year, even if they were temporarily halted by sanctions.

Article source: Financial Associated Press