Western curbs on Russian oil products redraw global transport plan

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Economy Apr 09, 2023 07:00PM ET

Western curbs on Russian oil products redraw global transport plan
© Reuters. FILE PHOTO: Oil is pumped into an oil tanker on the Ust-Luga oil products terminal in the settlement of Ust-luga, April 9, 2014. REUTERS/Alexander Demianchuk/File Photo

By Mohi Narayan and Jonathan Saul

NEW DELHI/LONDON (Reuters) -Global gas suppliers are turning to longer and costlier routes that invent extra carbon emissions to switch their diesel and other products as Western restrictions on Russian cargoes bear reshuffled global energy transport patterns.

As a results of the European Union ban on Russian gas that began on Feb. 5, tankers carrying neat oil products corresponding to gas, diesel, jet gas and naphtha are travelling between 16 and 18 days to raise Russian affords to Brazil or U.S. cargoes to Europe, in step with two transport sources.

That is up from the four to 6 days a ship extinct to commute from Russia to Europe, stated the 2 sources, a dealer at a foremost shipbroking firm and a charterer inquisitive relating to the Russian trade of naphtha, which is extinct to create plastics and petrochemicals.

The ban comes on high of a discontinuance listless remaining year on Russian coarse sales into the bloc as properly as Western trace caps.

Since the initiate of the ban, the Aesthetic Tanker Index printed by the Baltic Replace, which measures moderate freight rates for transport fuels fancy gas and diesel on one of the most most in model global routes, has extra than doubled.

The redrawing of the transport plan underscores the knock-on results of Western efforts to punish Russia over its invasion of Ukraine remaining year, alongside with to gas offer insecurity and pushing up prices at the same time as policymakers trouble about inflation and the probability of a world economic downturn.

“No longer handiest are voyages for lots longer, however vessel behaviour has additionally modified, preserving vessels from working in other CPP (neat petroleum product) markets,” Dylan Simpson, freight analyst at oil analytics firm Vortexa, wrote in a March 31 yell.

Russian cargoes of gas are heading to far-flung traders in Brazil, Turkey, Nigeria, and Morocco as Moscow compensates for the lost European trade, while Europe is importing extra fuels corresponding to diesel from Asia and the Middle East, in step with transport data from Refinitiv and Kpler.

Asian cargoes, in turn, are being displaced by Russian fuels in Africa and the eastern Mediterranean, and redirected to the mixing hub of Singapore for momentary storage, two northeast Asian refinery sources stated.

European importers whose naphtha cargoes travelled from Russian ports to Antwerp in four days prior to Russia’s invasion of Ukraine now must wait 18 days for different affords from the US, the shipbroking source stated.

The U.S. is additionally emerging as a high supplier of heavy naphtha to Europe amid the EU ban, while the Community of Seven Countries, EU and Australia bear capped Russian naphtha prices at $forty five a barrel and diesel and gas at $100 a barrel for trades that consume Western ships and insurance protection. Meanwhile, Brazil, traditionally a U.S. naphtha importer, is boosting purchases from Russia at extra comely prices.

    Nonetheless, the lumber from Russia to Brazil can clutch 18 days or longer and, at up to $7 million per voyage, the prices are only about double that of a U.S. shipment, the ship charterer inquisitive relating to the Russian market stated.

Brazil bought around 240,000 tonnes of Russian diesel and gasoil in the foremost three weeks of March, accounting for a quarter of Brazilian imports, up from Russia’s 12% part in February and now no more than 1% remaining year, stated Benedict George, head of diesel pricing with energy and commodity data provider Argus.

    “Till February, Europe had remained Russia’s foremost marketplace for sophisticated product exports; on the opposite hand, in the condo of a month, a foremost pivot has been noticed,” tanker dealer E A Gibson stated in a fresh file.


Measured by technique of cargo miles, which multiplies the cargo quantity in metric tonnes by the gap travelled in nautical miles, the quantity of Russian oil product shipments to Brazil in March rose to a pair of.07 billion metric tonne-nautical miles (MT-NM) from 941 million MT-NM in November, in step with data from valuation company VesselsValue.   Shipments from Russia to Nigeria rose to 1.88 billion MT-NM in March from zero in November, VesselsValue estimates confirmed.

Aesthetic product cargoes to Saudi Arabia in March jumped to 1.75 billion MT-NM from 31 million MT-NM in November, while shipments to the United Arab Emirates had been 4.43 billion MT-NM in March, up from 2.85 billion MT-NM in November, the info confirmed.

Also in March, Russian neat products shipped to Togo reached 973 million MT-NM, up from zero in November. In quantity phrases, Brazilian imports of oil products from Russia had been about 284,000 metric tonnes in February, up from 73,300 tonnes in September, VesselsValue data confirmed. Conversely, Russian exports to the Netherlands dropped to 238,200 tonnes in February from 1.15 million tonnes in September.

These longer distances are being completed at greater expenses for Russian products than for in model shipments from Europe.

In line with market estimates, freight rates for the UK/European continent to West Africa are quoted at $55.77 per tonne for a product tanker with a old fashioned 37,000-tonne load. This compares with an indicative charge of $174.24 per tonne for shipments from Russia’s Baltic ports to Nigeria, $103.84 for Morocco and around $150 to Egypt.

With ships travelling additional, that is additionally seemingly translating into bigger emissions from smokestacks.

In line with pre-pandemic data, a 10% expand in mileage for all tankers travelling to and from the European economic condo would expand their emissions by around 1.5 million tonnes of carbon dioxide, equal to the emissions of around 750,000 automobiles per year in Europe, stated Valentin Simon, data analyst with the Transport & Atmosphere secure tank in Brussels.

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