Sanctions aftermath: India emerges as top buyer of Russia’s seaborne crude

India has become the largest seaborne importer of Russian crude in the wake of the EU ban on seaborne oil imports and subsequent G7 price cap for exports.

Exports to India increased from virtually nothing prior to Russia’s invasion of Ukraine to 1.2 Mb/d in November last year, according to Poten & Partners. The volumes of exports eased slightly in December 2022.

India is followed by China, which has increased its intake of Russian crude, from around 600 Kb/d in the beginning of the year to around 940 Kb/d in November.

“While India is targeting mostly European barrels from the Black Sea and some from the Baltic, China has focused on the Russian exports from the Far East. Currently, China buys almost all crude exported from Kozmino as other traditional customers Korea and Japan reduced their imports. Turkey initially increased its purchases from the Kremlin, but its imports of Russian crude have fallen by more than 50% since peaking in August,” Poten said.

The exact data on the shift in exports are not available as transparency of the Russian trade flow data has been reduced due to the conflict, sanctions, and the increased use of ship-to-ship transfers as well as ‘going dark’ by shutting off vessels’ AIS responder to hide their destination.

The sanctions have also resulted in greater use of the “shadow fleet”, basically older vessels plucked from near-retirement that are being used to circumvent western sanctions. These vessels are predominately owned by offshore companies in countries with more lenient shipping rules. The result of this trend has been an “ageing” of the tanker fleet calling on Russian ports.

“For example, in January 2022, 40% of the Aframax voyages ex-Russia were done on tankers that were younger than 10 years and only 28% on vessels that were older than 15 years. No vessels older than 20 years were utilized. By December, this age profile had changed dramatically: Only 22% of the Aframaxes were less than 10 years old and 50% was over 15 years old. Several voyages were performed on vessels older than 20 years and one Aframax employed was even older than 25 years,” Poten added.

The ton-mile demand generated by Russian crude oil exports has tripled since the start of the war, driving more ton-mile demand and tightening the oil markets.

This trend has been very supportive for the freight market and is likely to continue in 2023.

With regard to the product tanker market, there are just two weeks left until EU’s refined products embargo and G7 price cap come into effect.

For January to date, Europe has imported ~1mbd of clean products from Russia, most of which is diesel. Rather than weaning itself of Russian supplies this month, Europe has maximized import volumes, Gibson said in its weekly tanker report.

“Whilst this, combined with imports from other sources is likely to exceed demand, it still suggests that a sizeable portion of Russian supply needs to be replaced. Thus, increased fixture activity from the East and Americas will likely be required as Russian supply dries up. In the short term, increased stockbuilding may help manage the gap. Europe has done a better job than expected in hoarding diesel ahead of the embargo, whilst a milder winter and softer gas prices have reduced gas to oil switching somewhat,” the report reads.

In the short term, Europe looks to be in a good position to cope with the loss of Russian oil imports. However, without an increase in other sources of supply, stocks will decrease and the price difference between Europe and export hubs such as India and the Americas will widen, Gibson said.

As explained, this could lead to an increase in demand for freight services and higher freight rates, though these will be constrained by the price differences between Europe and other regions. Volatility is expected to remain a key factor in the market as trading opportunities come and go.

Fonte: World Maritime News