The tanker trade has been turned on its back, one year after Russia’s invasion of Ukraine. In its latest weekly report, shipbroker Gibson said that “it now marks one year since the Russian invasion of Ukraine. Instead of being a short military operation, it has evolved into a protracted war with thousands dead and injured on both sides, severe devastation to Ukraine and no sign of de-escalation. For the tanker market, the last twelve months have seen a dramatic reorientation of long-established trade patterns and fuelled a strong rate environment. Therefore, on the one-year anniversary of the outbreak of the war what can we expect going forward?”
According to Gibson, “in less than a year, Russia’s petroleum sector has gone from being a leading mainstream producer to operating under sanctions and price caps. Despite this, Russian seaborne crude exports have so far remained robust at 5.18 mbd in January versus 4.5 mbd in December when the crude price cap came into force and averaged of 4.6 mbd for the whole of 2022. Russia has successfully managed to increase heavily discounted crude sales to both Chinese and Indian buyers, the latter of whom went from importing hardly any Russian crude at the outbreak of the war to 1.58 mbd in January 2023, with further increases possible primarily to the benefit of the Aframax and Suezmax sectors”.
“However, Russia has announced a crude output cut of 500 kbd in March vs. January levels to support prices in the face of the price cap in addition to a 25% cut in March western port exports vs February levels but this could indicate Russia is expecting to struggle to find buyers beyond its current exports. Attention has turned to Russian refined product exports to see if a market can be established in Latin America, Africa, SE Asia and potentially the Middle East or if Russia will be forced to reduce refinery runs and thereby offer more crude to the market or make further production cuts”, the shipbroker said.
Gibson also mentioned that “another notable theme has been the growth of the illicit fleet, with an ever increasing list of vessels arriving at Russian ports to load cargoes since the price caps came into effect. We expect further growth in the coming months as more tonnage gravitates into this trade, which will continue to reduce the size of the fleet available to mainstream market players and support tanker rates in non-Russian trade. Meanwhile, previous importers of Russian oil have diversified their oil supplies away from Russia. The Middle East, the US, Latin America, WAF and North Sea have all boosted their supply of crude to the EU-27 and UK. At the same time, European refining runs have increased but beyond Q1, refinery maintenance is likely to see these volumes begin to soften temporarily, whilst capacity constraints also put a ceiling on how much crude Europe can refine domestically”.
Meanwhile, “the above trends have supported both the crude and product tanker sectors by increasing tonne mile demand, with year on year increases of 6.63% and 3.29% respectively and these should remain elevated for the foreseeable future given that a return to the pre-sanction trading environment is currently unlikely. Even if the war in Ukraine were to come to a sudden end some countries may be reluctant to ever rely on Russia for energy supplies to the previous extent”.
“Whilst it must not be forgotten the immeasurable toll the war has had on Ukraine and its people; it cannot be denied that for the tanker sector, the conflict has served as a catalyst which has helped to cement the post Covid-19 demand recovery for tanker shipping. It has highlighted the importance of the tanker industry in terms of both simultaneously supporting energy security for some, whilst facilitating the flow of sanctioned oil for others and the geopolitics surrounding the sector more broadly”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide