(Bloomberg) -- Trafigura Group is helping Russian diesel make its way to Latin America as a ban to sell such barrels in Europe looms.
The commodities trader chartered the vessel Marlin Aventurine to deliver 262,000 barrels of diesel to Ecuador’s state oil company Petroecuador, according to people with knowledge of the situation.
The cargo demonstrates how Russian oil continues to circulate in global markets despite calls to boycott Vladimir Putin’s state.
In an effort to starve Putin’s government of cash, the US banned imports of Russian crude and products, while a European Union ban takes effect gradually with deadlines starting later this year. Trafigura was among the companies that said it would turn away from Russia. In April, the trader announced it would stop signing contracts for crude oil from Russian state-backed producer Rosneft PJSC before an EU deadline of May 15 to end new deals, and would significantly reduce purchases of oil products. Other commodity merchants that said they would halt new business with Russia include Gunvor Group Ltd and Glencore PLC. Fuel markets have since been thrown into disarray as countries scramble to replace Russian products ahead of the ban.
When asked about the deal, a spokesperson for Trafigura said in an email the company doesn’t comment on individual shipments and that it continues to comply in full with EU sanctions. Traders are reducing their exposure to Russia in line with sanctions rulings. The business remains highly lucrative, however, with buyers able to secure steep discounts on Russian barrels of crude, diesel and fuel oil. Other countries like India and China have already emerged as key destinations for Russian products shunned by Europe.
Read more: Diesel Pinch Looms as World Seeks Relief From Pricey Gas
Petroecuador, which typically buys fuels from US refineries, says its main priority is to quell a growing supply pinch. “Ecuador has a deficit in the supply of oil products and our number one priority is to make up for that deficit,” Quito-based Petroecuador said in a statement. The company noted Ecuador doesn’t restrict the purchase of hydrocarbons of Russian origin.
However, that doesn’t mean selling Russian oil to Ecuador is without risk. Petroecuador warned traders that it is not able to provide a letter of credit for oil of Russian origin and “the trader must assume that risk,” according to the statement. That is to say, not even Ecuador’s central bank would provide a guarantee for payment in the event that Petroecuador backs out financially from the deal.
The Marlin Aventurine loaded in the Russian port of Taman and arrived in Ecuador last week. The Marlin Aventurine is carrying a load of diesel that can be used for power generation, to fuel ships or as a diluent to make fuel oil, one of the country’s top exported products.
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