The Daily View: Forcing new tactics

NEXT week marks the fourth anniversary of Russia’s invasion of Ukraine and the EU and UK are pushing hard to push a meaningful sanctions package over the line in time.

Political blockers could yet scupper those plans, but the mood music in Brussels right now suggests it will pass. Assuming it does it will further reshape oil flows and tanker demand already going through a rapid period of recalibration.

There are currently lots of ‘coulds’ caveating the scenario planning, but if Russian clean product exports were to fall due to the lack of available shadow fleet tonnage and the exit of mainstream tankers from Russian trade, there could be a boost to mainstream tanker demand as refiners in other regions hike runs and exports to compensate for the lack of Russian barrels.

But the prospect of a new regime that effectively freezes out the remaining compliant trades and pushes it on to the shadow fleet is not the only factor affecting sanctioned oil supply chains at the moment.

Right now, Russia’s Baltic shipments are facing mounting challenges from the weather, with the most extensive sea ice in 15 years around its oil ports. That could curb a chunk of the nation’s Baltic programme because of a shortage of vessels that can cope with the conditions. The freeze has already led to one tanker accident at Ust-Luga and may slow shipments.

Then there is the existing recalibration of shadow fleet ships accounting for Venezuela being taken off the market, and that buyers of sanctioned crude oil have plenty of alternative above board barrels available at reasonable prices.

Sanctioned oil markets are not what they were — millions of barrels of unsold Iranian and Russian crude have accumulated in floating storage. And that is ramping up competition. Moscow and Tehran are effectively rivals competing to supply China with discounted crude.

That’s forcing new tactics and new supply chains to account for the shifting market dynamics.

As Russia dials down exports into India and Türkiye in favour of the long-haul China market, new ship-to-ship transfer hubs are opening up. Our friends over at Vortexa are watching the south of Suez Canal area for oil tankers laden with Russian oil right now and we have also noticed increased activity for the same vessel profiles at Nakhodka Bay.

Meanwhile, argues Vortexa, the emerging trend of Venezuela, and to a lesser extent Iran-trading fleets joining the Russian trade could offer a buffer if the EU enforces a full maritime ban on vessels trading Russian oil.

Richard Meade
Editor-in-chief, Lloyd’s List

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