According to the world’s largest independent energy trader, Russia’s oil exports will fall by up to 1 million bpd this winter even as the country expands its “tanker fleet.”
Russell Hardy, chief executive of London-based Vitol, said that while Russia has made progress in protecting itself from the impact of tougher sanctions affecting its seaborne crude oil, effective from December, exports are still likely to fall by 500,000 bpd to 1 million b/d this winter.
“The expectation is that nearly all European companies will turn away from non-compliant business,” Hardy told the Financial Times. “We think [Russia’s] logistics solutions are evolving, they are solving problems. But whether they eat it or not is the whole point we don’t know.”
Western countries are torn between trying to limit Moscow’s revenue after Invasion of Ukraine and fears that the loss of Russian oil could cause price increases as the countries grapple with energy-driven inflation.
The United States is leading the group of G7 countries in a plan to start limiting prices for Russian oil exports before the EU ban on insurance for Russian tankers takes effect on December 5. That would allow Russian oil companies to access Western markets. and institutions if oil is sold below market price.
However, Russian President Vladimir Putin has said that Moscow will not sell oil under the price cap plan.
Hardy said Russian oil companies will be “under the gun to find solutions” and he is expected to see more and more transfers and other methods used to conceal Russian oil. The largest supertankers cannot reach Moscow’s Baltic ports, but Hardy said he expected Russia to use its smaller fleet to transport oil to the very large tankers (VLCCs) that are on the way. waiting near EU waters, a potential environmental hazard.
Russian oil exports have largely increased since the invasion even as many European customers turn away from Moscow, with India and China increasing their imports.
Both India and China have fleets of state-backed VLCCs, although it remains unclear whether they will let Russia use them without access to Western insurance and reinsurance markets.
Vitol was once one of Russia’s biggest oil carriers but said it had stopped trading goods from companies like state-backed Rosneft. Vitol traded 7.6 trillion bpd of oil globally in 2021, giving it good visibility into often opaque physical markets.
Bjarne Schieldrop, an analyst at Norway’s SEB, said he expected oil prices to average $115 a barrel in the first quarter of next year – up from $95 now – due to Russian supply disruptions, including about 5.5 million b/d by sea and 2.5 million b/d by pipeline in the 100 million b/d global market.
Schieldrop said the “shadow fleet” currently has an estimated total of about 270 tankers, according to shipbroker BRS, many of which are carrying Iranian and Venezuelan oil under sanctions. Traders suspect Russian companies are looking to secure older tankers that are about to be scrapped.
“There will be a lot of friction. Schieldrop said. “And there will be disruptions to the flow of Russian crude to the market.”
Hardy said oil prices are likely to continue to come under pressure this winter, despite an expected shortage in Russian supply and moves by major producer group Opec+ to limit production to lift production. price.
He said Vitol’s estimate for oil demand in the fourth quarter was about 2 million bpd lower than earlier this year, reflecting weak demand in the aviation sector, the US petroleum market and in China.
“Our long-term view remains supportive of oil prices over the next five years,” Hardy said. “However, today we are dealing with poor demand and the negativity and gloom of the economy.”