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World’s Largest Oil Trader To Completely Phase Out Russian Crude

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Commodity major Vitol plans to wind down its activities involving Russian crude oil by the end of the year, Bloomberg has reported, citing a spokesman for the company.

Trade with Russian oil "will diminish significantly in the second quarter as current term contractual obligations decline," the spokesman said, adding, "we anticipate this will be completed by end of 2022".

The report notes the announcement was made following an urge from the Ukrainian government addressed to the four major commodity traders to stop dealing in Russian oil, the revenues from which, the Ukrainian government says, are used to finance the war in Ukraine.

Vitol had previously signaled that it was planning to cease trade in Russian oil at some point. Yet it also needs to decide what to do with its stake in the giant Vostok oil project led by Rosneft.

Vitol, together with Mercantile & Maritime, bought a 5-percent in the Siberian megaproject before the pandemic. With reserves estimated at 2.6 billion tons of crude, equal to some 19 billion barrels, the group of fields that the Vostok Project spans could produce up to 100 million tons of crude annually once it reaches full capacity. Rosneft itself estimates the fields' reserves at up to 44 billion barrels.

Now, with all the public pressure on businesses to exit Russia—and many already doing it—pressure may increase on private companies such as the commodity trading major, too.

Last month, unnamed sources told Reuters that Vitol has long-term contracts with Rosneft until at least October this year. Long-term contracts with private commodity traders are not normally made public.

Per that report, oil traders expected both Vitol and fellow commodity major Trafigura to continue trading Russian crude this month and next, although perhaps in lower volumes "given the potential difficulties in selling the cargoes to EU buyers."

The European Union has been discussing a potential oil embargo on Russia for weeks now, but the only thing that seems to have been established is that if one is ever agreed, it would be a gradual wind-down of imports rather than a sudden suspension.

By Irina Slav for Oilprice.com

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