Russian exporters of naphtha, which is used primarily to make plastics and petrochemicals, are labeling it as gasoline or shipping it from ports without specifying its destination to circumvent sanctions.
The Economic Pravda publication reported this, citing Bloomberg News and analysts with the FGE energy consultancy and the Kpler data and analytics firm.
According to the report, there is no clear, dedicated outlet for Russian naphtha now that its major buyers (South Korea and Europe) cannot buy it directly because of the sanctions. China and India are taking more but both have ample domestic supplies, the report states.
Nevertheless, according to the report, Russia shipped around 1.34 million tons of naphtha in March, a similar volume to the same period last year.
According to Bloomberg, Russian gasoline has been observed flowing to storage tanks in the United Arab Emirates and West Africa, something that was previously rare. “These should be naphtha or potentially even off-spec gasoline with a lot of naphtha blended into them,” Bloomberg quoted an FGE analyst as saying.
According to Bloomberg, there is a financial incentive to this measure: sanctions set a price cap of USD 45 per barrel on Russian naphtha, but market prices are currently above that level, while gasoline has a much higher limit of USD 100 per barrel.
More Russian naphtha loadings are signaling unknown destinations, which could indicate an attempt to obscure its origin and reflect the difficulty finding buyers, Bloomberg quoted a Kpler analyst as saying.
In addition, according to Bloomberg, a key route for many of Russia’s oil products has been a measure known as “re-documenting” or the blending with non-Russian fuels at trading hubs such as Singapore and Fujairah in the UAE. The practice gained pace after the war and has shown no signs of abating since the enactment of sanctions, Bloomberg wrote.
According to Kpler, naphtha volumes loaded from Russia and signaling Singapore nearly quadrupled to around 164,000 tons in March, compared with a year earlier, while cargoes signaling UAE jumped to 156,000 tons from zero.