Saudi Aramco said the global oil market is already adjusting to sanctions on Russia, with Moscow redirecting crude flows to Asia from Europe and other producers making the opposite switch.

“Realignment is happening,” Amin Nasser, chief executive officer of the world’s biggest oil company, said at the Future Investment Initiative event in Riyadh. “Russians, with the right discount, are able to place their crude in different markets.”

Those discounts are helping Russia overcome the difficulties it has securing insurance and shipping for its oil, Nasser said, as the US and Europe tighten sanctions following President Vladimir Putin’s invasion of Ukraine. Moscow has sold its flagship Urals crude at roughly $20-$30 a barrel below benchmark Brent futures in the past six months.

“There are logistical issues, insurance issues,” Nasser said. “But that’s being handled with the right discounts. The flow is going to Asia -- though, it takes longer. And crude that used to go to Asia is now being directed to Europe and other parts of the world.”

Saudi Arabia and Russia are the world’s biggest oil exporters. Riyadh typically sends around 60% of its crude shipments to Asia -- primarily China, Japan, India and South Korea.

Still, the European Union’s plan to impose a price cap on Russian crude from Dec. 5 is creating a lot of “uncertainty,” Nasser said.

Analysts including JPMorgan Chase & Co. have said Russia will be forced to cut production because it won’t be able to find enough buyers and ships to move all its oil.

Blue Hydrogen

The Aramco CEO also said he wanted to sign blue hydrogen supply contracts before pushing ahead with plans to manufacture the fuel. Seen as crucial for the transition from oil and coal to cleaner energy, it’s made by converting natural gas and capturing the carbon dioxide emissions.

It may take several years before it’s cheap enough to produce on a mass scale. Blue hydrogen now costs the equivalent of $250 to $300 a barrel of oil, according to Nasser.

“We need an off-take agreement because these are costly projects,” he said. “Without an off-take agreement, you cannot grow that market big time.”

Aramco’s first blue hydrogen deals are likely to be signed with Asian buyers.

“The market that we’ve identified so far is in Japan and South Korea,” he said. “It’s picking up in Europe. But it will take time.”