03/24 Closing prices / revised 03/27/2023  09:05 GMT  |    03/24    OPEC Basket      74.60  -1.28 |    03/24    Mexico Basket (MME)   $59.02  -0.85  | 03/23     Venezuela Basket (Merey) $60.00  (Estimated EnergiesNet)  | 03/24     WTI Texas Intermediate  May CLK23  $69.26   -0.70 | 03/24    Brent May   BRNK23  $74.99  -0.92  | 03/24    Gasoline April RBJ23    $2.5885    -0.2%    03/24    Heating Oil  April HOJ23   $2.6952   +0.4%   |  03/24   April  Natural Gas  NGJ23  $2.216    +2.9%    03/24  Active U.S. Rig Count (Oil & Gas)    758  +4 | 03/27   USD/MXN Mexican Peso   18.3872  Live data  | 03/27     EUR/USD    Live data     1.0767  Live data  | 03/27   US/Bs. (Bolivar)      $24.40160000  (BCV)    |  

Russia’s Dark Tanker Fleet Gets Stretched Sailing Thousands of Miles: Oil Strategy – Julian Lee/Bloomberg

The shadow fleet built up by Moscow’s proxies isn’t big enough to haul all its crude to Asia

A Russian oil tanker returning to port for its next cargo.
A Russian oil tanker returning to port for its next cargo. (Bloomberg)

By Julian Lee

 Russia assembled a huge fleet of tankers to beat western sanctions. They’re struggling to get the job done, writes Bloomberg oil strategist Julian Lee.

The European Union banned almost all seaborne crude imports from Russia back in December, forcing Moscow to divert the shipments thousands of miles to China and India.

But as the fleet of Russian and Russia-friendly tankers makes those longer-distance deliveries, it’s getting stretched out, making the country increasingly reliant on European-owned vessels again. That matters because they are barred from carrying Russian oil — and cannot get insurance to do so — if the cargo costs more than $60 a barrel. 

Before the EU crude import ban and an accompanying G7 price cap were introduced, almost half of Russia’s crude exports from its western ports were carried on ships owned by European firms. That share collapsed to about one-quarter in the first month after the sanctions came into effect on Dec. 5 and was filled with Russia’s own vessels and ships from the shadow fleet, shown as “unknown” in the chart above.

But in the second month, most of those Russia-friendly vessels were still engaged on their first post-sanctions voyages. With insufficient tankers available to maintain the flow, the share of the trade carried on European ships rebounded to more than one-third.

The figures will ebb and flow. Most of the Russian-owned and shadow-fleet tankers are now on their way back after discharging their cargoes in India, so it’s likely that their share of the Russian trade will rebound again in February, but after that the reliance on European vessels could climb again.

Trade Shift

The shift that caused this has been swift. 

At the start of 2022, European buyers took 89% of the crude shipped out of ports in western Russia, India took almost none. A year later, the positions had been reversed, with 85% of shipments heading to ports in India and just 6% remaining in the Mediterranean.

That has had a dramatic impact on the average distance a barrel of Russia’s crude has to be hauled to get it to a buyer which, in turn, raised the length of time cargoes are on the water and the number of vessels needed to maintain the flow.

The trade-weighted average journey of a barrel of Russian crude exported from the country’s main export terminals in the Baltic rose from less than 3,000 miles in January 2022 to more than 9,000 miles a year later. The initial increase was driven by a slump in flows to customers in the Baltic region — Poland, Lithuania, Finland and Sweden — and northern Europe — principally the Netherlands and Germany. They were initially replaced by buyers in the Mediterranean, where a refinery owned by Lukoil PJSC boosted its processing of Russian crude.

By April, India was emerging as a major buyer of Russian Baltic crude, with China also taking significant volumes. The ebb and flow of these two markets drove the trade-weighted average distance over the summer of 2022.

A slump in shipments to the Mediterranean in the final months of 2022, with the European Union import ban coming into force on Dec. 5, drove almost all cargoes to Asia, pushing the average journey to its current level.

Longer journeys mean more time at sea and require more ships to keep the flow moving. Voyage times on key routes measured from vessel tracking data show that it takes 66 days for a tanker to complete a round-trip journey from the Baltic or Arctic to the west coast of India, as long as there are no significant discharge delays when it reaches its destination. 

Most deliveries to China are discharged at ports in Shandong province, entailing a round-trip journey from the Baltic of 123 days, or more than four months.

Russian cargoes are typically carried from the Baltic on Aframax-sized vessels, capable of carrying about 700,000 barrels of crude. Ships of this size are also used within the Black Sea and to Turkey. Cargoes loading in the Arctic and those moving from the Black Sea to India are typically carried on larger Suezmax vessels, which can carry about 1 million barrels of crude.

In January 2023, Russia exported 91 crude cargoes from its export terminals in the Baltic, Arctic and Black Sea, of which 68 went to India and another nine to China. Maintaining exports at this level to the same destinations over the coming months would require a dedicated fleet of 203 crude tankers — 162 Aframaxes and 41 Suezmaxes.

Russia’s state-owned shipping company Sovcomflot PJSC has a fleet that includes 10 Suezmax tankers and 32 Aframaxes. That’s nowhere near enough to carry all of Russia’s crude exports from its western ports.

Even adding a shadow-fleet of vessels with Moscow-friendly owners, that’s not yet proving enough to meet the nation’s needs.

_____________________________________________________________________________

Julian Lee is an oil strategist for Bloomberg First Word. Previously, he was a senior analyst at the Centre for Global Energy Studies. Energiesnet.com does not necessarily share these views.

Editor’s Note: This article was originally published by Bloomberg on February 15, 2023.  All comments posted and published on EnergiesNet.com, do not reflect either for or against the opinion expressed in the comment as an endorsement of EnergiesNet.com or Petroleumworld.

Original article

Use Notice: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.

EnergiesNet.com 02 20 2023

Share this news
CopyRight©1999-2021, EnergiesNet.com™  / Elio Ohep – All rights reserved

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission fromPetroleumworld or the copyright owner of the material.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top