Sanctioned Russian Fleet Impact
April 5, 2024
As the US tightened sanctions enforcement, major refineries in India announced they have stopped buying Russian crude carried by the Russian fleet mainly owned by Sovcomflot, a trend likely to expand to buyers in the Far East. Two scenarios could emerge when Asian buyers walk away from Russian oil and/or Russian ships: 1) an increase of “shadow” Aframax fleet for Russia > India+China demand if crude exports remain at similar level (or possibly higher due to drone strikes taking out refinery capacity); 2) a substitute of Russian crude with imports from the Middle East and US Gulf by conventional tankers. Based on our statistical analysis, the two scenarios both foresee a positive impact on tanker earnings, one mainly for Aframaxes and the other for VLCCs.
Tracking the AIS data, we observed on average 18 Russian-owned Aframaxes have been deployed to export Russian crude to the two Asian buyers. The latest US sanctions are expected to push these tonnages to operate as floating storage or idling empty at sea. To substitute the tonnage supply, we foresee escalated interest in secondhand sales for ships from conventional owners to the “shadow” fleet. The tightened tonnage supply, incorporating an inefficiency factor of ~26% for the shadow fleet, is calculated to provide slight support on the Aframax market, by 15 WS points for TD25 and $5,800/day on round-trip earnings. We will expand on the second scenario in the following Weekly Highlight.
Figure 1 – Russian Afra/LR2 Fleet Deployment Figure 2 – Shadow Aframax Impact if
Russian Export Levels Remain Steady
Source: McQuilling Services, AIS Tracking; TCEs based on ECO tankers without scrubber
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