Refiners Preem, Neste shy away from Russian crude

Northwest European refiners Neste and Preem are retreating from purchases of Russian crude, as strengthening international sanctions on Moscow raise buy-side concerns about supply reliability.

Finland's Neste said it has mostly replaced Russian crude with others, because of "the current situation and the uncertainty in the market." Swedish refiner Preem said it has "paused all incoming orders of Russian crude oil, pending sanctions."

Neste operates the 197,000 b/d Porvoo refinery, and Preem runs the 220,000 b/d Lysekil and the 106,000 b/d Gothenburg plants. The latter said Russian crude accounts for around 7pc of its total purchases, and it estimates that North Sea crude accounts for around 70pc. It said a cargo of Russian crude arrived at the port that serves Lysekil plant as of 25 February.

Vortexa tracking data show around 114,000 b/d of Russian Urals crude loaded in January and February headed to Neste, and 50,000 b/d to Preem. Both refiners have been diversifying their feedstock portfolios over the years.

The EU, US and UK have ramped up their sanctions on Russia for its invasion of Ukraine, falling short of outright hitting Moscow's profitable energy export sector that is critical to Europe for supply of oil and gas. Buyers may struggle to broker the necessary credit and shipping agreements to procure their crude, given recent measures to disconnect some Russian banks from the global Swift financial messaging system and a US decision to ban dollar transactions with the Russian central bank, the Russian national wealth fund and the Russian finance ministry.

Russian medium sour Urals crude has been struggling to find outlets on the spot market since the end of last week. Russian producer Surgutneftegaz today failed to award its sell tenders for a second time in four days.

By Ruxandra Iordache and Benedict George