Oil tankers on their way to Russia as export price cap kicks in

Two tankers headed to Russia on Monday expecting to be loaded with Russian crude as a price cap on oil exports by a coalition of Western countries came into effect.

On Friday, the European Union agreed to limit Russian offshore oil prices to 60 dollars per barrelaimed at limiting Moscow’s revenues and limiting its ability to finance its invasion of Ukraine.

Russian President Vladimir Putin and senior Kremlin officials have repeatedly said they will not supply oil to countries that implement price caps.

In comments posted on Telegram after the agreed cap, the Russian embassy in the United States criticized what it said was a “reshaping” of free market principles and reiterated that its oil would continue to be sought despite the measures.

But while Russia is moving forward on its promise not to sell its oil to countries that implement price caps, it is not deterred from finding buyers for its oil. The G7 price ceiling will allow non-EU countries to continue importing seaborne Russian crude, but it must be sold at a lower price than the ceiling.

Trade intelligence firm VesselsValue, which tracks the Russian oil trade, told CNBC that there has been a significant reduction in Russian crude as European imports are sought with alternative markets.

“This is expected to continue into December when the strong sanctions kick in,” said Peter William, commercial product manager at VesselsValue. “Russia has potentially found substitute markets for its crude oil, with India and China increasing seaborne imports from Russia.”

Jacques Rousseau, managing director of global oil and gas at ClearView Energy Partners, told CNBC that there is a discrepancy between the US Energy Information Administration and OPEC forecasts for Russian oil.

“When comparing 4Q 2022 to 1Q 2023, EIA forecasts a decline of ~1.35 MM bbl/d versus OPEC’s forecast of a decline of ~0.85 MM bbl/d,” Russo said. “The scale of the decline in Russian oil production quarter-on-quarter could be the difference between a deficit or surplus in the global balance sheet in Q1 2023 and whether or not OPEC+ has to cut its production targets again.”

MarineTraffic sees two empty tankers heading to Russia.

One is the Minerva Marina tanker, which sails under the Maltese flag.

The other is Moskovsky Prospect, which sails under the Liberian flag and comes directly from Bombay, India.

Movement of ships and congestion of tankers

AIS data, which tracks ship traffic, shows a number of tankers in the Black Sea, mainly crude oil and chemical tankers from Russia, in transit and have listed various locations as their destinations, including India, the UAE and China, according to a MarineTraffic spokesman.

Meanwhile, tanker congestion is piling up as a result of Turkey requiring tankers to have proof of insurance to travel through Istanbul in the Bosphorus.

Export of diesel from Russia to Europee have risen slightly between October and November. Sanctions on Russian diesel exports begin on February 5, 2023.

“This is probably due to supply issues and the onset of the European winter,” William said. “There was a drop in exports due to the start of the Russia-Ukraine conflict, which also coincided with the European transition to spring.”

US LNG to the EU ranged from a high of 11.48 million cubic meters in April to a low of 7.34 million in September 2022, according to VesselsValue.

“The decline in US demand after the winter season may have contributed to the increased exports in April and as other countries look to stockpile,” William said.

Andrew Lipow, CEO of Lipow Oil Associates, told CNBC that when Russia decided earlier this year to cut off natural gas supplies to parts of Europe, the U.S. stepped in to fill the gap.

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

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