US sanctions on Russia affect oil freight

Oil-linked shipping costs rebounded after last week’s announcement of tougher US sanctions to drain Russia’s war coffers, in a move that poses significant threats to Moscow’s maritime distribution chains.

On January 10, the US Treasury Department announced new measures to deplete Russia’s energy revenues, including sanctions against key producers Gazprom Neft and Surgutneftegas, along with 183 vessels that were “largely tankers that are part of the shadow fleet, as well as tankers owned by fleet operators based in Russia”.

The Treasury added that several of the designated tankers had transported Russian and Iranian oil, and further extended sanctions to Russia-based marine insurance providers Ingosstrakh Insurance Company and AlfaStrakhovanie Group.

This will deal a critical blow to Russia, which has been forced to divert its supplies of crude oil and petroleum products to the Asia-Pacific, after these volumes were prohibited by European and G7 sanctions, which came into force in December. of 2022 and February 2023. respectively.

Already around 890 unique tankers have loaded Russian oil (comprising both crude oil and petroleum products) in the past six months, analytics firm Vortexa told CNBC on Jan. 7, and 107 of these vessels (or 12% of the total ) are subject to ship controls. -Specific sanctions at the time.

The figures do not take into account the January 10 announcement. On Wednesday, the Paris-based International Energy Agency It assessed that around 160 of the 183 blocked tankers had moved more than 1.6 million barrels per day of Russian oil last year, representing 22% of Russian maritime exports during the period.

The latest US measures will also reduce the number of vessels available for commissioning by non-Russian parties, raising shipping costs for other tankers. Since the January 10 announcement, the effect of the bans has extended to freight derivatives, and the volume of traded forward freight agreements (FFA) contracts, which can allow traders protect against the volatility of freight rate fluctuations, jumped to 11,412 on January 1. 10, and exceeding 7,900 and 6,700 on January 13 and 14, respectively, according to data from the Baltic Exchange. The figures compare with 2,987 and 1,683 contracts traded daily on average in the months of November and December, respectively.

Rates for supertankers crossing from the Middle East Gulf to Asia-Pacific, a leading route for the oil industry, rose more than 40% between Jan. 9 and 14, according to pricing data from Argus Media.

As a result, the sanctions “could significantly disrupt Russian oil supply and distribution chains,” the IEA warned, noting that Russian exports “will be affected by the reduction of the shadow tanker fleet” and the “elimination of shipping insurance, control by the dominant authorities”. “Russian oil traders and designation of key manipulation firms in consumer markets.”

However, the agency did not take into account the latest US measures in its Russian supply forecasts, although it noted that crude exports from the Eastern European country – a key member of the OPEC+ alliance – fell by 250,000 barrels per day. month-on-month up to 4.6 million. barrels per day in December.