The redrawing of the global oil trade has been a mainstay after the was on Ukraine, with Russian oil flows acting as a major disruptor in the market. In its latest weekly report, shipbroker Gibson said that “the European ban on the imports of Russian products came into effect in early February and expectations at the time were that the country’s clean petroleum product (CPP) exports would come under pressure. However, Russian exports have actually increased compared to levels seen last year. Between February and April to date, Russia on average shipped around 225kbd more clean products compared to the same period in 2022. About two thirds of all Russian CPP exports in the West originate from Baltic terminals. Here, the biggest growth has been seen in shipments from the Baltic into the Middle East Gulf/Red Sea, with this trade up by circa 200kbd over the period. Strong increases in shipments have also been seen to Turkey, North and West Africa, Latin America (primarily Brazil) and South East Asia”.
According to Gibson, “Russian CPP exports from the Black Sea also found new homes, with the Middle East, North Africa and Turkey becoming main new destinations. Not only is the volume of CPP trade up, but Russian barrels are also travelling much longer distances: sailing days (single voyage) from the Baltic for trade into Turkey are around 2 weeks and over 3 weeks for shipments into the Middle East Gulf. This compares to 3.5 days from Ust Luga into ARA”.
The shipbroker added that “with more and more tankers tied up shipping Russian barrels, the latest market dynamics only serve to limit further available tonnage supply for the conventional mainstream market. At the same time, however, changes in Russian CPP flows have negative implications elsewhere in a highly interconnected global oil market. Increased Russian flows into Africa and Latin America are directly competing with exports from Europe and the US, limiting regional product outflows. In Europe, reduced gasoline shipments into West Africa help to keep inventories at elevated levels and add pressure on refining margins. In the US, increased Russian diesel exports into Brazil are reducing Brazil’s appetite for US barrels. The picture is similar in Asia. Russian naphtha exports into the region surged in recent months, with these arrivals contributing to the decline in naphtha cracks in Asia, which are already suffering from the weak petrochemical demand and growing substitution from cheaper LPG feed stock”.
Gibson concluded that “it is likely to take time for the global refining and trading landscape to adjust to changes in Russian CPP export flows, whilst further unintended consequences cannot be ruled out. Meanwhile, CPP exports out of Russia could potentially soften as we head deeper into Q2 and into Q3. Robust Russian CPP exports so far this year suggest the country’s refineries are yet to go into spring maintenance. There is very little reliable information coming out of Russia at present; however, unless maintenance is postponed into autumn, more refineries should head into maintenance soon. Furthermore, Russian domestic product demand typically increases over the summer holiday season, limiting product outflows. Nonetheless, whilst some disturbance could be on the cards in the short term, the bigger picture is that Russia has successfully found alternative longer haul homes for its CPP, offering the promise of a major additional boost to clean tanker tonne mile demand going forward”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide