Litasco considers moving trading hub from Geneva to Dubai: sources

Litasco, the trading arm of Russia's second-largest oil company Lukoil, is looking to shift its trading headquarters from Geneva in Switzerland to Dubai in the UAE, as more of Moscow's oil flows east in response to Western sanctions, several industry sources said June 8.

Litasco, which is not subject to Western trade sanctions or other measures on Moscow in response to Russia's invasion of Ukraine, has seen its European business dwindle as many buyers and refiners in the region have sharply cut their dependence on Russian oil.

Prior to Russia's invasion of Ukraine, Litasco would trade around 3 million b/d of crude and refined products, including Russian and non-Russian origin oil.

"The plan is to move to Dubai," a source close to the matter told S&P Global Commodity Insights.

Many of Litasco's employees in Geneva have recently been asked whether they will be willing to relocate to Dubai, sources said.

Litasco declined to comment on the move to Dubai. "Litasco does not comment on rumors, business, commercial or political related matters," a company spokesperson told S&P Global.

Litasco already has an office in Dubai, according to its website, based in the Dubai Multi Commodities Centre, which was set up as the region's main commodity hub.

Increased financial measures against Russian banks have already forced many refiners and trading houses to reassess their business with Russian oil companies, with some already opting for alternative oil supplies.

Change in trade flows

This comes amid a complete metamorphosis in Russian oil trade.

Chinese refiners have rekindled their taste for Russia's ESPO crude, while India's big refiners have recently bought a sizable amount of Urals.

As a result, the Middle East is also emerging as a new trading hub for Russian oil, according to many trading sources.

A new group of smaller traders, many of which are based in the Middle East, have started to buy and sell Russian oil as many of the bigger traditional trading houses wind down their exposure to the country, with Russian crude and products increasingly losing favor in European markets as a result of the war in Ukraine.

Heavyweights like Vitol, Gunvor and Trafigura have already cut back their trade with Russia's key oil producers in recent weeks, paving the way for a handful of relatively new entrants.

And Europe, previously the largest buyer of Russian crude, is now scrambling for other alternatives.

Europe is particularly dependent on Russian oil and was importing about 2.7 million b/d of crude and another 1.5 million b/d of products, mostly diesel, before the invasion of Ukraine.

On May 30, EU leaders agreed a compromise deal to ban almost all seaborne Russian oil imports by year-end and trigger a major upheaval in global oil trade.

Russia's key export grade Urals has continued to trade at hefty discounts to other crudes in recent months as this key grade has lost its main customers in Europe.

Medium sour grade Urals was assessed by Platts, part of S&P Global, at a discount of $35.20/b to Dated Brent on June 7.

On an outright basis, Platts assessed Urals at 87.45/b and Dated Brent at $125.795/b on June 7, S&P Global data showed. Urals was assessed at $90.72/b and Dated Brent at $100.48/b Feb. 23, the day before Russia invaded Ukraine.