Last month’s U.S. sanctions on Russian oil exports have upended global oil trade as Asia rushes to cover Russian barrels with alternative supply and tanker rates soar amid significantly decreased availability of non-sanctioned vessels.
The Biden Administration’s farewell sanctions on Russian oil trade were the most aggressive yet and sanctioned dozens of vessels that Russia used to ship the ESPO crude blend from Kozmino to China’s independent refiners.
Many of the vessels, specialized tankers, and shuttle tankers transporting Russia’s oil from the Arctic and Far East Pacific fields and production clusters to Asia have now been sanctioned.
As a result, trade in Russian crude loading for Asia in March has dropped as tanker rates are soaring and shippers are scrambling for non-sanctioned vessels.
As Russia’s top buyers in Asia – China and India – prefer to steer clear of sanctioned tankers and entities involved in the trade, the freight rates for shipping Russian crude to its biggest buyers have soared.
The trade between Russia’s western ports and India was also disrupted due to the sanctions. Freight rates to Russian Urals grade from Baltic Sea ports to India jumped by 20% in February to $7 million to $8 million per voyage.
As buyers become increasingly wary of potentially running afoul with the latest U.S. sanctions, refiners in China and India are scrambling for supply from the Middle East and West Africa, and even from Brazil.
The price of the Middle Eastern benchmark Dubai even flipped to a premium to the lower-sulfur Brent Crude as demand for crude from the Middle East in Asia surged.
Eventually, the chaos in global oil trade will end, but this will take time, possibly a few months, analysts have said.
Indian refiners are reshuffling and reconfiguring the oil traders, insurers, and vessel owners with which they work in a bid to continue receiving the cheaper Russian oil without risking violating the U.S. sanctions, anonymous executives directly involved in the trade told Bloomberg earlier this week.
By Charles Kennedy for Oilprice.com
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