January 30, 2023

Oil tankers are on their way to Russia as the export price cap begins

Oil tankers are on their way to Russia as the export price cap begins

Two tankers were heading to Russia on Monday and were expected to fill with Russian crude as caps on their oil exports from a Western alliance come into effect.

On Friday, the European Union agreed to cap prices for seaborne oil in Russia 60 dollars a barrelWith the aim of limiting Moscow’s revenues and limiting its ability to finance its invasion of Ukraine.

Russian President Vladimir Putin and high-ranking Kremlin officials have said repeatedly that they will not supply oil to countries that apply price caps.

In comments posted on Telegram after the cap was agreed, the Russian embassy in the US criticized what it said was a “reconfiguration” of free-market principles and asserted that its oil would continue to be in demand despite the measures.

But while Russia is going ahead with its pledge not to sell its oil to countries that apply price caps, it is not shy about finding buyers for its oil. The G7 price cap would allow non-EU countries to continue importing seaborne Russian crude oil, but it would have to be sold below the price cap.

Trade intelligence firm VesselsValue, which tracks Russian oil trade, told CNBC that there has been a significant drop in Russian crude with a search for European imports with alternative markets instead.

“This is expected to continue into December as the heavy penalties kick in,” said Peter William, director of commercial products at VesselsValue. Russia has found alternative markets for its crude, with increased marine imports from Russia, India and China.

There is a disconnect between the US Energy Information Administration and OPEC’s Russian oil production forecasts, Jacques Russo, managing director of global oil and gas at ClearView Energy Partners, told CNBC.

“When comparing Q4 2022 to Q1 2023, the EIA projects a decrease of ~1.35 mb/d versus OPEC’s forecast of a decrease of ~0.85 mb/d,” Russo said. “The magnitude of the decline in Russian oil production on a quarterly basis may be the difference between a deficit or surplus in the global balance in the first quarter of 2023, and whether or not OPEC+ needs to cut its production targets again.”

MarineTraffic sees two empty tankers heading to Russia.

One of them is the tanker Minerva Marina, which is sailing under the Maltese flag.

The other is Moskovsky Prospect, sailing under the Liberian flag, and coming straight from Bombay, India.

Ship traffic and tanker congestion

AIS data tracking ship movements shows a number of tankers in the Black Sea, particularly crude and chemical tankers from Russia and in transition that have listed various locations as their destinations, including India, the United Arab Emirates and China, according to MarineTraffic. official speaker.

Meanwhile, tanker stops are increasing as a result of Turkey requiring tankers to obtain proof of insurance to travel through Istanbul in the Bosphorus Strait.

Diesel exports from Russia to Europee It may rise slightly between October and November. Sanctions on Russian diesel exports begin on February 5, 2023.

“This is most likely due to supply issues and the onset of the European winter,” William said. “There was a decline in exports due to the onset of the conflict between Russia and Ukraine, which also coincided with the European transition into spring.”

US LNG volumes to the EU fluctuated from 11.48 million cubic meters in April to 7.34 million in September 2022, according to VesselsValue.

“Low demand in the US after the winter season may have contributed to the increase in exports in April, while other countries are looking to stock up,” William said.

When Russia decided earlier this year to cut natural gas supplies to parts of Europe, the United States stepped in to fill the shortfall, Andrew Lipow, CEO of Lipow Oil Associates, told CNBC.

“This trend will continue as Europe builds more LNG import infrastructure, and the US builds new natural gas pipelines and LNG export terminals to accommodate the increased production,” Lipow said.