As Europe scrambles to ditch Russian oil, the US is shaping up to fill that gap, thanks to its ‘super suitable’ cheaper crude, Vortexa says
- Europe can rely on the US if it stops using
Russian oil, Vortexa's chief economist said.
- US crude is "super suitable" for Europe's refineries due to its quality, cost, and availability, David Wech said.
Europe is under pressure to wean itself off Russian energy, starting with a ban on crude imports. It could prove expensive and politically tricky, but the region wouldn't have a problem covering that gap and the US is emerging as an ideal substitute, according to energy market intelligence provider Vortexa.
"The US will rank highly, that's natural, given its size, and its proximity and also the crude quality," Vortexa chief economist David Wech said in an interview with Insider. He added that the market security provided by the US also makes it an ideal supplier.
Russia supplies about 25% of the European Union's
Western countries have hit Russia with tough sanctions following its invasion of Ukraine, but the EU has not yet banned Russian oil and gas.
Germany said this week it is prepared to stop buying Russian oil, the Wall Street Journal reported, which would allow the EU to impose fresh sanctions on Moscow. Germany had already cut its intake from Russia, which now accounts for 12% of the country's oil consumption, down from 35% before the invasion of Ukraine, German Economic Minister Robert Habeck said.
Russia normally exports some 4 million barrels of oil per day by ship, with the rest of its roughly 7 million barrels per day in overseas sales going via pipelines east and west.
Much of this crude ends up in Europe, which takes around 2.7 million barrels per day, according to S&P Global Platts. Another 1 million barrels per day arrive via the 4,000-kilometer long Druzhba pipeline, which crosses Eastern and Western Europe and services Germany, the Netherlands, Poland and Austria, among others.
Unlike natural gas, which arrives almost exclusively to Europe via pipeline from Russia, the remaining 1.7 million barrels a day that could be affected by an EU ban would be reasonably easy to source from a variety of crude exporters, Wech said.
"Europe is in a very favourable geographical position. Apart from Russia, there are also the Caspian countries, there is the production in the North Sea, there is production in North Africa, there is Africa, Nigeria, Angola, which is also very close from a distance perspective," Wech said. "Then, of course, there is the US."
Official data shows US crude exports hit a record 10.6 million barrels per day in the week to April 15 and Europe is its biggest customer right now. In the first four months of the year, 42% of shipments have gone to Europe, up from 38% last year, while 39% went to Asia, down from 44% at this point in 2021, Wech said.
The key is that
"(US) light sweet crude is generally suitable for the European market. It's generally crude that is relatively ample available, and is therefore relatively cheap," Wech said. "That's that's super suitable for Europeans also from the overall processing cost perspective."
Even though Europe can buy oil from other countries, a ban on Russian crude would risk an escalation of war in Ukraine, according to Wech, and hit consumers that are already struggling with sky-high inflation, largely driven by the price of oil and gas.
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