Buy hydrocarbons, number go up.
From Freightwaves, June 7:
Morgan Stanley cites Russian diesel fallout; Poten sees ‘dramatic’ tanker impact
....MUCH MOREThe Ukraine-Russia war has already shaken up global energy markets. Sanctions finalized Friday by the EU will shake them up a lot more — not only for the tanker industry but also for American diesel and gasoline consumers.
The EU is a vastly larger buyer of Russian petroleum than the U.S., which banned imports from Russia in early March. The new EU sanctions will end Europe’s imports of Russian seaborne crude by Dec. 5 and refined products by Feb. 3, 2023.
Perhaps even more importantly, the EU will phase in bans on EU insurance, reinsurance, technical services or any financial services for tankers carrying Russian crude and products to any country, including current buyers in India and China, over the same time frames.
The U.K. is also set to ban insurance and reinsurance for such tankers.
Over 90% of the world’s ships are insured in Europe and the U.K. The insurance ban could have “a dramatic impact on seaborne trade of Russian oil and oil products,” said brokerage and consultancy Poten & Partners. “The potential implications cannot be overstated.”
Russia crude exports
What does the new EU import ban have to do with U.S. fuel buyers? And how could tanker owners be affected?
Since the war began, Russia has been able to keep its crude exports flowing. It is replacing lost sales to the West with sales to India and, to a smaller extent, China.
Even before the ban, the EU has replaced 1 million barrels/day (b/d) in crude purchases from Russia, according to a Morgan Stanley report on Monday. But “there are limitations to the degree this ‘swap’ can extend further,” it said. As a result of those limitations, as well as supply contracts due to expire, it expects Russian crude production to decline by 1 million b/d between now and year-end.
Lower crude production in Russia — to the extent it’s not replaced by OPEC, the U.S. and others — is a tailwind for oil prices.
In tanker trades, the longer distance traveled by post-invasion Russian cargoes has boosted spot freight rates for Aframaxes (tankers with capacity of 750,000 barrels) and Suezmaxes (1-million-barrel capacity). These small and mid-sized tankers can be accommodated at Russian terminals.
To the extent Russian cargoes are eventually replaced by Middle East exports, tanker demand would shift toward higher-capacity VLCCs (very large crude carriers; tankers with 2-million-barrel capacity), according to Evercore ISI analyst Jon Chappell.
Yet there are a lot of moving pieces. Ship brokerage BRS made the counterargument Tuesday that the EU would source more crude from the U.S. — cargoes largely carried on Suezmaxes — leaving less U.S. crude to be exported to Asia, cargoes that move aboard VLCCs.
Russia diesel exports....
HT: ZH
