Tankers head to Russia as oil price cap goes into effect on exports

Two tankers were heading to Russia on Monday, expecting to be filled with Russian crude as a price cap on its oil exports from a coalition of Western nations came into effect.

On Friday, the European Union agreed to cap Russian maritime oil prices at $60 a barrel, in a bid to limit Moscow’s revenue and limit its ability to fund its invasion of Ukraine.

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

In comments posted on Telegram following the cap agreement, the Russian Embassy in the United States criticized what it called an “overhaul” of free market principles and reaffirmed that its oil would continue to be requested despite the measures.

But while Russia is moving forward on its promise not to sell its oil to countries that enforce price caps, it is not deterred from finding buyers for its oil. The G7 price cap will allow non-EU countries to continue importing Russian crude oil transported by sea, but it must be sold below the price cap.

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

“This is expected to continue through December as the severe penalties begin,” said Peter William, Head of Commercial Products at VesselsValue. “Russia has potentially found substitute markets for its crude, with India and China increasing maritime imports from Russia.”

Jacques Rousseau, managing director of global oil and gas at ClearView Energy Partners, told CNBC there is a disconnect between the US Energy Information Administration and OPEC’s Russian oil production forecast.

“Comparing 4Q 2022 to 1Q 2023, the EIA forecasts a decrease of around 1.35MM bbl/d compared to OPEC’s forecast of a decline of around 0.85MM bbl/d”, said Rousseau. “The magnitude of Russia’s quarter-on-quarter decline in oil production could mean the difference between a deficit or surplus in the global balance in the first quarter of 2023 and whether or not OPEC+ needs to cut to its production targets again.”

MarineTraffic sees two empty tankers heading for Russia.

One is the Minerva Marina tankers, sailing under the Maltese flag.

The other is the Moskovsky Prospect, sailing under the Liberian flag and coming direct from Bombay, India.

AIS data that tracks vessel traffic shows a number of tankers in the Black Sea, mainly crude and chemical tankers from Russia that are in transit and has listed various locations as destinations including India, the Arab Emirates United States and China, according to a MarineTraffic. spokesperson.

Meanwhile, the tanker traffic jam is growing as Turkey requires tankers to have proof of insurance to travel through Istanbul in the Bosphorus Strait.

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

“It’s probably due to supply issues and the onset of the European winter,” William said. “There was a decline in exports due to the start of the Russian-Ukrainian conflict, which also coincided with the European transition to spring.”

Liquefied natural gas from the United States to the EU fluctuated 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 drop in US demand after the winter season may have contributed to the increase in exports in April and as other countries seek supplies,” 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 United States stepped in to make up the shortfall.

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