Shell could make a $20 million profit on a shipment of cheap Russian oil it bought just days after the oil company announced it was pulling out of the country following its invasion of Ukraine.
When the London-listed company announced on Monday plans to pull out of a joint venture in Russia, its chief executive, Ben van Beurden, said he was shocked at the loss of life in Ukraine in a “senseless act” of military aggression that “threatens European security.”
“Our decision to exit is something we make with conviction,” he said. “We cannot – and will not – stand by.”
However, on Friday, Shell’s powerful trading arm bought 725,000 barrels of Urals, Russia’s flagship oil, from trader Trafigura at a record $28.50 discount to Brent, the world’s oil benchmark, on delivery terms.
The deal was the first to take place in the open trading window of S&P Global Platts since Russia invaded Ukraine, and traders said it would net Shell about $20 million as the oil was forced through its processing system and then sold to consumers.
“I’m amazed that Shell has lifted this load,” said one senior trader.
Trafigura is legally required to lift a certain number of Urals loads per month under an agreement it signed with Russian producer Rosneft before the war in Ukraine. All week long he has been looking for a buyer for a single shipment of 7,250,000 barrels, steadily increasing the discount in the S&P window in the hope of finding a counterparty.
Most traders assumed that the oil would be bought by a Chinese or Indian trader or refiner, rather than a major international oil company that had just announced its plans to leave Russia.
Shell, which is not only a major oil and gas producer but also one of the world’s largest energy traders, said in a statement that it was appalled by developments in Ukraine and had ceased most of its oil-related activities.
“However, we are currently purchasing it and other Russian products for some refineries and chemical plants to ensure that we continue to produce key fuels and products that people and businesses rely on every day.”
“We will continue to reduce the use of Russian oil as alternative grades of oil become available for purchase, but this is very difficult, since Russian oil plays a significant role in global supply, and there are relatively few alternatives in the current tough market.”
Shell added on Saturday that it would channel any profits from “the limited amount of Russian oil we have to buy” into a special fund.
“Over the coming days and weeks, we will be working with aid partners and humanitarian agencies to determine where best to channel money from this fund to mitigate the terrible consequences of this war for the people of Ukraine,” the statement said.
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Even though Russia’s energy exports have been curbed by heavy US, UK and EU sanctions on Moscow and its financial system, most Western refiners, banks and shipowners are shunning the country’s vast commodity market.
Energy Aspects, an advisory firm, said last week that 70% of Russia’s oil is “struggling to find buyers,” even at very discounted prices.
As big traders scoured the market looking for alternative sources of supply, this pushed up the price of Brent crude, hitting a nine-year high of nearly $120 a barrel this week.
Trafigura declined to comment. Earlier this week, the company said it was reviewing its stake in Vostok, the giant Arctic oil project being developed by Rosneft. Trafigura is a preferred trading partner for the Kremlin-controlled oil producer.
The article has been updated since it was posted to include Saturday’s Shell statement.