Tankers on their way to Russia as oil price cap comes into force on exports

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Two tankers were bound for Russia on Monday expecting to be filled with Russian crude oil as a price cap on oil exports from a coalition of Western countries came into effect.

On Friday, the European Union agreed to limit Russian marine oil prices to $60 a barrel, aiming to limit Moscow’s revenues and limit 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 the price cap.

In comments published on Telegram after the limit was agreed, the Russian embassy in the United States criticized what it said was the “reform” of free market principles and reiterated that demand for oil would continue despite the measures .

But while Russia is keeping its promise not to sell its oil to countries that apply the price cap, it is not deterred from finding buyers for its oil. The G7 price cap allows non-EU countries to continue importing Russian crude oil by sea, but it must be sold for less than the price cap.

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

“This is expected to continue into December when the harsh sanctions kick in,” said Peter William, Trade Product Manager at VesselsValue. “Russia may have found replacement markets for their crude oil, with both India and China increasing overseas imports from Russia.”

Jacques Rousseau, general manager of global oil and gas at ClearView Energy Partners, told CNBC that there is a discrepancy between the U.S. Energy Information Administration and OPEC’s Russian oil production forecasts.

“Comparing 4Q 2022 to 1Q 2023, the EIA is projecting a ~1.35 MM bbl/d decline versus OPEC’s forecast of a ~0.85 MM bbl/d decline,” said Rousseau. “The magnitude of the quarter-on-quarter drop in Russian oil production could be the difference between a global deficit or surplus in the first quarter of 2023 and whether or not OPEC+ needs to cut its production targets again.”

MarineTraffic sees two empty tankers on their way to Russia.

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

The other is the Moskovsky Prospect, flying the Liberian flag, and came straight from Bombay, India.

Shipping and tanker stalemate

AIS data tracking shipping traffic shows a number of tankers in the Black Sea, mostly crude oil and chemical tankers from Russia, en route and destined for various locations, including India, the UAE and China, according to a MarineTraffic spokesperson.

Meanwhile, a stalemate is building on the tanker as a result of Turkey requiring tankers to have proof of insurance to pass through Istanbul in the Bosphorus.

Diesel export from Russia to Europee increased slightly between October and November. Sanctions on Russian diesel exports will start on February 5, 2023.

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

According to VesselsValue, US liquefied natural gas to the EU fluctuated from a peak of 11.48 million cubic meters in April to a low of 7.34 million in September 2022.

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

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

“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,” said Lipow.



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