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Russia Markets Crude Oil to Bangladesh

Russia wants to sell crude oil to Bangladesh in order to diversify its oil export market in the face of Western sanctions over its invasion of Ukraine.

State Minister of Power, Energy, and Mineral Resources Nasrul Hamid told journalists on Monday at Dhaka’s Bidyut Bhaban that the world’s third largest oil producer had already presented a proposal to Bangladesh.

“We received a proposition from Russia stating their desire to sell us crude oil. The Bangladesh Petroleum Corporation (BPC) is presently investigating how it can import oil while also paying its obligations,” he stated. According to BPC sources, if the purchase goes through, there would be some issues. Aside from deciding which currency to use for the transaction, there are a few other concerns in importing Russian crude oil.

“Bangladesh does not have the capacity to refine additional crude oil as the annual capacity of the country’s lone refinery – Eastern Refinery – is around 15 lakh tonnes and Bangladesh has two contracts with Saudi Aramco and the United Arab Emirates to supply the same quantity of crude oil in 2022,” a source said, requesting anonymity. “If Bangladesh goes for Russian crude oil at a cheaper rate, then the relationship with long-term suppliers – Saudi Arabia and the United Arab Emirates – will be impacted.”

Russia ranks third in terms of oil production, trailing only the United States and Saudi Arabia. Russia’s total oil production in January 2022 was 11.3 million barrels per day, with crude oil accounting for 10 million barrels. The Russian offer comes at a time when the country’s oil prices are at an all-time low as a result of Western sanctions imposed after Russia invaded Ukraine. While several European and Asian countries have shied away from Russian oil, China and India have seized the chance and begun hoarding the cheaper crude oil.

The Indian government defended its decision to purchase Russian oil, claiming that what it purchases from Russia in a month is less than what Europe purchases from Russia in an afternoon. India increased its purchases from Russia to 627,000 barrels per day in April, up from 274,000 barrels per day in March. The April daily figure was 20 times India’s daily average for Russian imports last year, according to S&P Global, an international data reporting business. In 2021, India’s total oil consumption was 4.76 million barrels per day.

In contrast, China was already Russia’s largest Asian buyer. The world’s manufacturing powerhouse requires oil to drive its expanding automobile and petrochemical industries. According to Reuters, China’s seaborne Russian oil imports will reach a near-record 1.1 million barrels per day (bpd) in May, up from 750,000 bpd in the first quarter and 800,000 bpd in 2021, according on Vortexa Analytics forecasts.

Meanwhile, many European countries have continued to import Russian oil, with plans to gradually reduce their purchases. Brent crude futures advanced 82 cents to $113.61 a barrel, while US West Texas Intermediate (WTI) crude rose to $110.97 a barrel, adding to both contracts’ slight gains last week. On Monday, however, Russian ESPO and Sokol crude oil were sold at $76.66 per barrel and $100.70 per barrel, respectively.

Bangladesh currently imports between 91 percent to 92 percent of its entire 6.3 million tonnes consumption, with the remainder supplied from local gas reserves in the form of condensate, a bio-product of gas.

State Minister Nasrul Hamid stated on Monday that there are no plans to raise fuel pricing at this time, although changes may be made in the future. “We do not wish to adjust oil prices at this time. We simply want to keep it stagnant,” he stated. “Oil and gas prices are now volatile on the global market. The rate at which the product is sold in the morning fluctuates during the day. A Tk20 increase is followed by a Tk2 decline,” he continued. “However, as a political government, we anticipate a manageable pricing adjustment.” Regarding the country’s fuel reserves, Hamid stated that the present quantity met the country’s needs. “However, getting ships to bring oil from outside has become more difficult because ship freight costs have climbed by three to four times,” he explained.

Concerning the possibility of a dollar crisis hindering the opening of letters of credit (LCs) for the import of oil, Hamid stated that there had been a complication, but that it was being resolved as banks began opening the LCs. According to Energy and Mineral Resource Division sources, the BPC currently has a one-month storage capacity – equivalent to six lakh tonnes of gasoline – at major land and riverine depots around the country.

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