Over 600 oil tankers! Russia's 'shadow fleet' is expanding.
2023-02-07 09:00
To counter escalating sanctions from Western countries, Russia's "shadow fleet" has expanded to approximately 600 vessels, with a growing number of tankers secretly transporting Russian oil globally.
According to Bloomberg, Ben Luckock, co-head of oil trading at commodity trading firm Trafigura, stated that about 400 crude oil tankers have "shifted" to Russian operations, accounting for roughly 20% of the global fleet; in the refined oil sector, approximately 200 refined oil tankers are involved in Russian trade, representing about 7% of the global fleet.
He noted that Iran and Venezuela also had "shadow fleets" under sanctions in the past, managing sanctioned oil, but these fleets were relatively small, while Russia's "shadow fleet" is considerably larger.
In December last year, the EU, G7, and Australia announced their approval of a $60 per barrel price cap on Russian seaborne oil, with plans to review and adjust the price cap every two months to keep it at least 5% below market levels. Subsequently, on February 3, the "price cap coalition" set a price cap on Russian refined oil products, with $100 per barrel for more expensive fuels like diesel and $45 per barrel for lower-quality products like fuel oil.
According to the regulations, companies within the jurisdiction of the "price cap coalition" countries are only permitted to provide shipping services, shipping insurance, and financing for the transportation of Russian oil globally within the maximum price limit. Russia has always relied on sea transport for oil exports, particularly on shipping companies from the EU and G7 member states. The "price cap coalition" hopes to sever most of Russia's ties with the global oil tanker fleet in this way.
Luckock believes that the Western price cap on Russian oil will ultimately push up crude oil and refined oil prices due to increased tanker mileage and longer routes.
Oil prices have fallen slightly this year due to strong Russian production and lower-than-expected Chinese oil demand. Despite escalating international sanctions, many buyers and shippers are still willing to do business with Russia. As of February 2, London Brent crude futures were trading near $80 per barrel.
Luckock expects crude oil prices to trade in the range of $80 to $100 per barrel as Chinese demand recovers, exceeding $90 in the summer, although futures prices may struggle to reach triple digits.
Supported by strong Asian demand, rising oil prices, and increased tanker supply, oil loading from Russia and Kazakhstan via Primorsky Krai and Ust-Luga in January reached its highest level since 2019 at 7.4 million tons; while oil loading from Primorsky Krai, Ust-Luga, and Novorossiysk in Russia is expected to reach a monthly high of over 9.5 million tons in January.
Russia has stated that it will not accept the Western oil price cap. At the end of December last year, Russian President Putin signed a decree banning the supply of crude oil and refined products to countries that comply with the cap for five months starting February 1. On January 30, Russia released a legal framework supporting the decree, including prohibiting deliveries to foreign entities involved in any price restrictions and prohibiting the inclusion of any price cap mechanisms in contracts.
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