Clean product tanker rates soared last week after the European Union and G-7 nations targeted Russia's petroleum sales. Restrictions on Russian crude exports began in early December.
Sanctions have redirected Russian energy flows from Europe to Asia. The rejiggering of supply chains means Russia has to rely more on tankers. According to Bloomberg, this has led to a 400% surge in the daily rates for clean product tankers.
The latest data from the Baltic Exchange in London shows clean product tankers rates have reached $55,857 per day, surging 58% just last Thursday.
According to trading giant Trafigura, Russia relies on a "shadow fleet" of tankers to move crude and crude products. The trading firm said the fleet is about 600 ships.
Bloomberg said the surge in tanker rates has been "spurred in part by a bifurcation of the fleet with some tankers serving Moscow's interests and others the international market. It highlights a possible flipside of aggressive measures aimed at limiting Russia's petroleum revenues."
"Russian volumes continue to flow at more or less the same rate and that takes up a lot of ships."
"Ultimately, the spike shows demand is pretty good, and the fundamentals are strong," Lars Bastian Ostereng, an analyst at Arctic Securities.
About 400 tankers, or 20% of the global fleet, recently "switched" from hauling fuels for traditional countries to carrying Russian petroleum products, Trafigura's co-head of oil trading Ben Luckock said in a recent Bloomberg interview. That has reduced the number of tankers for traditional routes and is leading to the skyrocketing cost of freight.
Bloomberg pointed out that surging rates aren't entirely because of the tanker "switch." It's also due to more crude flowing by water following Western sanctions on Russia. Much of those energy exports are now being sent to Asia.
"We see no indication that Russia will have to cut back its exports of crude or refined products," said David Wech, chief economist of Vortexa, during a presentation late last week.
Furthermore, crude prices have edged over $86 a barrel following last Friday's announcement that Russia will reduce crude oil production by 500,000 barrels per day. This is in response to Western price caps on purchasing Russian fuel.
By Zerohedge.com