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U.S. sour crude cargo sails to Germany as Russia sanctions bite

By Reuters_News

19:32, 8 August 2022

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A file photo shows the Valero St. Charles oil refinery in Norco, Louisiana, August 15, 2008.
A file photo shows the Valero St. Charles oil refinery in Norco, Louisiana, August 15, 2008.

By Shadia Nasralla and Arathy Somasekhar

- A tanker of U.S. sour crude was delivered at Germany's port of Rostock last week for the first time ever, according to sources, analysts and vessel tracking data, as local refiners test alternatives to Russian oil.

The European Union plans an almost-complete embargo of Russian barrels by year-end, and is trying to wean itself off Russian crude imports, which have fed inland refineries in Germany, Poland and other central European nations via pipeline.

Refiners plan to replace Russian oil with seaborne Norwegian, Saudi Arabian, British and U.S. crude grades. Russia has already shown through its natural gas exports that it is willing to cut off European destinations in a tit-for-tat over the EU's financial sanctions that followed Moscow's invasion of Ukraine in February.

According to Refinitiv ship tracking data, the Capricorn Sun tanker loaded Mars Sour crude off the Louisiana coast in the United States and discharged at Rostock on Aug. 3. The tanker was chartered by Shell, according to two sources and Refinitiv ship tracking data. It was estimated to have carried about 570,000 barrels, based on shipping data.

Shell did not have an immediate comment.

"Although this is the first Mars crude oil shipment, there have been West Texas Sour shipments (to Germany) in the past, albeit few and far between," said Jim Mitchell, head of Americas oil analysts at Refinitiv.

"Mars has a higher distillate content than the WTI or the Eagle Ford grades. As the winter looms, Germany will increase its demand for distillate wherever they can get it from."

Distillates include refined products such as diesel, jet fuel and gasoil that is used for heating. Heavier, sour grades of oil tend to produce more distillate fuels than gasoline. Germany depends on Russia as a major source of diesel.


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The Rostock oil terminal in the Baltic Sea is connected via pipeline to two refineries – the 233,000 barrel-per-day PCK Schwedt refinery and TotalEnergies' 240,000 barrels per day Leuna plant.

The Schwedt refinery is majority-owned by Russia's state oil firm Rosneft while Shell and Eni hold minority stakes.

Both PCK and Leuna continue to receive Russia's main crude grade, medium sour Urals, through the Druzbha pipeline in compliance with EU sanctions on Moscow for its invasion of Ukraine.

Previously, German economy minister Robert Habeck said the country was working on solutions for Schwedt, including dipping into national oil reserves as well as getting shipments from the German port of Rostock and possibly Gdansk in Poland.

Schwedt supplies most of Berlin's fuel and Germany is struggling to wrest control of the plant, fearing retaliation by Moscow if the site is nationalised and as Western firms hesitate to step in.

Similarly, TotalEnergies' chief executive Patrick Pouyanne has said it would reduce its Russian crude intake via pipeline.

The United States exported nearly 3 million barrels of oil a day in 2021, but Germany is a fairly minor buyer, only importing about 77,000 bpd, according to U.S. Energy Department figures.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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