HBy highlighting an obvious problem, shipping broker Gibson is trying to shed some light on how the latest round of Russian oil trade sanctions will be implemented? In its latest weekly report, ship broker Gibson said that “with just over 5 weeks to go before the European Union ban on imports of Russian crude oil comes into effect, companies are now forced to decide on which market they wish to trade. Simultaneously, the G7 Oil Price Cap is also expected to come into effect and although the price cap has yet to be finalized and requires EU ratification, the EU crude oil embargo seems carved in stone. So the question now turns to who will continue to buy Russian crude after December 5, and how logistically will they transport that crude.”

According to Gibson, “if the price cap does not materialize, EU shipping companies may be allowed to continue shipping Russian crude to third countries, as was the case for Russian coal exports after the clarification after the EU embargo in August. Nevertheless, price cap or not, the volumes of Russian crude that can be legitimately transported without falling under EU, US or UK sanctions (if G7 services are used) should be lower. at current volumes. Shipping companies will therefore have to choose sides. The balance of tonnage in Russian and non-Russian commercial fleets will be critical to the strength of major crude markets. Before December 5, many companies trading with Russia are expected to step back to ensure that all Russian cargo on board has been unloaded before the deadline and migrate to non-Russian trade.”

Source: Gibson Shipbrokers

“Our analysis shows that over the past 6 months, 366 Afra/LR2 and Suezmax tankers have been observed loading in Russian (non-CPC) ports, with more than 55% of these vessels checked from the EU, the G7 or allied countries. Of those 366 ships, 37 have been involved in ownership changes this year, with further analysis of their current ownership suggesting they will largely remain in Russian trade. However, with more than 200 vessels leaving the Russian trade, it is reasonable to assume that there may be insufficient tonnage to transport Russian oil to market, especially since the barrels currently traded to Europe will have to be redirected over longer distances,” the shipbroker noted.

Gibson added that “So far this year, Gibson has approximately 160 Aframax/LR2 and Suezmax S&P transactions. Of these, approximately 2/3 have gone to buyers who may be willing to transport Russian crude after the However, it is important to consider that vessels currently engaged in Iranian or Venezuelan trade could migrate, which has already been observed on a limited scale, and VLCCs could be used in transhipment operations, with more than 40 VLCCs sold this year to Asian or Middle Eastern buyers.Some sales will also be glossed over, while other ships from non-G7/EU countries may be attracted to Russian business if freight premiums increase”.

“Of course, the Russian commercial fleet could remain undersupplied, leading to increased S&P activity and potentially supporting higher second-hand values. It’s also important to note that the Russian fleet may not be trading efficiently. Evidence from Iranian and Venezuelan business models teaches us that sanctioned barrels often undergo multiple transshipments before reaching their final destination.Such practices are inefficient, meaning more vessels are needed for the same volume of cargo. In any case, some transhipment activity will be required this winter, with ice class tonnage to be maintained locally during peak ice conditions,” the shipbroker said.

“In the short term, there is a risk that as ships leave Russian trade, unauthorized trade routes will see an increase in the supply of ships, which will put downward pressure on rates. However, this will be partially offset but ton-mile demand increases, meaning earnings should remain comfortably above historical averages. Additionally, increased S&P activity will likely rebalance the balance as we approach 2023,” Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide