Russian Crude on Tankers is the Highest on Record

In what seems like a paradox, amid the current environment, the volume of Urals crude currently held on tankers, is the highest level since records began in 2016”. In its latest weekly report shipbroker Gibson noted that “it has been almost two months since Russia invaded Ukraine. Over this period, we have seen several rounds of sanctions being placed by Western governments. Most notably for our sector, Russian crude/oil products trade into the US has been banned, the UK has pledged to eliminate Russian crude/oil product imports by the end of 2022 and the EU focused on cutting dramatically over time its reliance on Russian crude and products. Sanctions have also been placed on the Russian tanker fleet, whilst there has been notable self-sanctioning by many oil companies with refining assets in Europe”.

“Yet, weekly AIS trade data from Kpler does not show any meaningful decline in Russian trade out of the Baltic and Murmansk. The picture is different for the Black Sea, where some trade has been affected by close proximity to military activities and storm damage to CPC loading facilities. Latest Gibson’s spot fixture data shows the same trend, suggesting that the situation in terms of actual export volumes will remain unchanged for another week or two at least, due to time lag between the date of the reported fixture and actual loading. However, although no major decline in export volumes has been seen, at least in Northern ports, the colossal political and public pressure in the West means that at least some Russian crude is forced to find an alternative home, with a notable increase in Aframax and Suezmax spot fixtures for delivery East of Suez. The same is also reflected in oil-on-water data compiled by Kpler, which shows that the volume of Urals currently held on tankers is its highest level since records began in 2016”, Gibson said.

“So, with Russian crude gradually shifting elsewhere, is Europe also seeking alternative supplies and where from? Trade data into North West Europe for March 2022 shows notable increases in volumes shipped from the US, West Africa and the Middle East relative to the 2021 average and March 2021, whilst considerably more North Sea crude is also retained within the local market. For European countries based in the Mediterranean the trend is broadly similar, although there are a few minor differences”, the shipbroker mentioned.

According to Gibson, “the changes in trade flows observed so far are clearly supportive to tanker demand in terms of tonne miles and for now these are almost entirely focused on Aframax and Suezmax tonnage. As severe restrictions have also been placed on Russian tanker tonnage, which accounts for 2% of the global Suezmax and 7% of the global Aframax fleet, it is perhaps not too surprising that significant spikes in Suezmax and Aframax rates in the West have been witnessed recently”.

The shipbroker concluded that “as the year progresses, newbuilding deliveries will ease the impact of restrictions faced by Russian tankers, with 44 Suezmaxes and 57 Aframaxes/LR2s scheduled for delivery over the course of 2022. It also seems almost inevitable that we will see further sanctions being placed on Russia. The EU has already publicly stated that it is working on possibility of introducing additional sanctions on Russian oil, while the unclear and imprecise wording of the existing EU sanctions on Russia will see a further decline in Russian trade, to Europe at least, after 15 May. As such, crude tanker tonne mile demand into Europe in order to replace Russian barrels is set to continue to grow. However, only time will tell the overall impact on demand, as the ability of Russia to find an alternative market for all of its trade with Europe is questionable, whilst the economic consequences of the current crisis will only become visible in a few months’ time at the earliest”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide