US sanctions against Russia hit oil freight rates

Oil-related shipping costs have risen since last week’s announcement of tougher US sanctions aimed at draining Russia’s military coffers, posing a significant threat to Moscow’s maritime distribution networks.

On January 10, the US Treasury Department announced new measures to deplete Russia’s energy revenues, including sanctions against key producers Gazprom Nafta and Surgutneftegaz, as well as 183 vessels that were “mainly oil tankers that are part of the shadow fleet, as well as oil tankers , which belong to Russian fleet operators.”

The Finance Ministry added that several of the marked tankers were carrying both Russian and Iranian oil, and extended sanctions against Russian marine insurance providers Ingosstrakh and AlfaStrakhavanne group.

This is set to deal a critical blow to Russia, which has been forced to redirect its crude oil and petroleum products supplies to the Asia-Pacific region after being banned by European and G7 sanctions that came into effect in December 2022 and February 2023. . respectively.

About 890 unique tankers have loaded Russian oil — both crude and refined products — over the past six months, with 107 of those vessels — or 12% of the total — exposed to the vessel, analyst firm Vortexa reported to CNBC on Jan. 7. -specific sanctions at that time.

The figures do not take into account the message from January 10. This was reported by the International Energy Agency based in Paris on Wednesday Some 160 of the 183 blocked tankers are estimated to have carried more than 1.6 million barrels per day of Russian oil last year, representing 22% of Russia’s maritime exports over the period.

Recent U.S. measures are also aimed at reducing the number of vessels available for commissions from non-Russian parties, increasing shipping costs for other tankers. Following the Jan. 10 announcement, the effect of the ban spilled over into freight derivatives, with trading volume for freight agreement (FFA) contracts, which can allow traders to hedge against fluctuations in freight rates, jumped to 11,412 in January. 10, and exceeding 7,900 and 6,700 on January 13 and 14, respectively, according to the Baltic Exchange. These figures compare with 2,987 and 1,683 contracts traded on average daily in November and December, respectively.

Rates on supertankers moving from the Middle East to the Asia-Pacific region — a major route for the oil industry — rose more than 40% between Jan. 9 and Jan. 14, according to Argus Media data.

As a result, the sanctions “may significantly disrupt the supply and distribution chains of Russian oil,” the IEA warned, noting that Russian exports “will be hit by the reduction of the shadow tanker fleet” and “liquidation of shipping insurance, curbing of dominant Russian oil traders and identification of key transport companies on consumer markets”.

The agency, however, did not factor the latest U.S. moves into its forecast for supplies from Russia, noting that crude exports from the eastern European country – a key member of the OPEC+ alliance – fell by 250,000 barrels a day from last month to 4 .6 million. barrels per day in December.