(The opinions expressed here are those of the author, a columnist for Reuters.)
LAUNCESTON, Australia - The European Union's decision to cut 90% of its oil imports from Russia will accelerate a move already underway - that is Moscow trying to sell as much crude as it can to Asian buyers.
Russia is likely to find China and India particularly willing, as the former reopens much of its economy from strict zero-COVID lockdowns and the latter seeks to lower its sky-high energy import bill.
The EU agreed to end seaborne imports of crude from Russia, European Council President Charles Michel said in a tweet at the end of a two-day summit of the bloc's 27 leaders.
"This immediately covers more than 2/3 of oil imports from Russia, cutting a huge source of financing for its war machine. Maximum pressure on Russia to end the war," he said.
The remaining third of the EU's oil imports from Russia come through the Druzhba pipeline, but Poland and Germany aim to stop purchases by the end of the year, which would mean the EU will halt 90% of all crude purchases from Russia.
News of the ban kept Brent futures well bid, with the more active August contract rising as high as $118.80 a barrel in early trade, versus Monday's close of $117.60.
Benchmark front-month futures are up about 26% since hitting $96.93 a barrel on March 16, which was the lowest price since Russia invaded neighbouring Ukraine on Feb. 24, an act that has triggered a range of sanctions by Europe and other Western countries against Moscow.
So far Russia has been able to export crude at volumes little changed from before the attack on Ukraine, with commodity consultants Kpler estimating that May's exports will be the highest since October 2019.
Russia's exports are forecast at 5.09 million barrels per day (bpd) in May, versus 5.10 million bpd in October 2019.
The switch in buyers is already being seen, with exports to China pegged at 1.04 million bpd, up from 937,000 bpd in April, while shipments to India were slated to be 853,000 bpd, down from a record 1.09 million bpd in April, but well above pre-invasion levels of around just 57,000 bpd in January.
Seaborne exports to Europe were estimated by Kpler at 2.23 million bpd, down from 2.42 million bpd in April and the lowest monthly total since July 2020, which was at the height of the COVID-19 lockdowns.
The question for crude oil markets is how successful will Russia be in finding new buyers to replace customers in Europe, and even if it can find willing purchasers, will it be physically able to ship crude on the longer sea voyages from its ports in Europe to Asia.
Russia could supply as much as 900,00 bpd to India, if the government utilises all of its Sovkomflot fleet of tankers, J.P. Morgan commodity analysts said in a May 25 note, but it's more likely that Asia's second-biggest oil importer will actually take about 500,000 bpd.
India's own oil tanker fleet could add another 500,000 bpd via the Suez Canal, if it was fully mobilised to transport Russian crude, the analysts said.
China's COSCO could import 1.8 million bpd of Russian crude on the St. Petersburg-to-Shanghai route, J.P. Morgan said.
However, these assumptions work on the basis of India, China and Russia using virtually all of their tanker capacity, which is unlikely to happen in reality.
What is more likely is that China and India do boost imports from Russia, but not by enough to offset the loss of European imports.
Another question is how does Europe replace Russian crude, given that refineries will want to process oil of a similar quality to Urals, the main grade currently supplied to Europe.
This limits the pool of suitable crude, and it becomes further limited if purchases are to be made on a spot basis.
Some grades of crude from Angola and Nigeria, as well as some from the Middle East have similar qualities to Urals, which has an API gravity of 30.6 and a sulphur percentage of 1.48, making it a medium sour oil.
The EU decision is likely to cause further dislocation in global crude flows, and it's further likely that these boost freight and other costs and raise security of supply concerns.
(Editing by Himani Sarkar)