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A massive reshuffle of tankers allows non-sanctioned vessels to pick up trade with Russian and Iranian oil, which will result in a rebound in China’s imports of cheaper crude from the two producers in March, from a two-year low in February, analysts and traders tell Reuters.
The Biden Administration’s farewell sanctions on Russian oil trade were the most aggressive yet and sanctioned dozens of vessels that Russia used to ship the ESPO crude blend from the Far Eastern port of Kozmino to China’s independent refiners. Many of the vessels, specialized tankers, and shuttle tankers transporting Russia’s oil from the Arctic and Far East Pacific fields and production clusters to Asia have now been sanctioned.
The sanctions on Russia, as well as the tightening sanctions on Iran’s shadow fleet, have prompted a run on non-sanctioned vessels, with daily rates doubling and even tripling in the past month.
These rate hikes have attracted operators of non-sanctioned tankers to enter the trade with Russian and Iranian oil amid handsome profits being made.
As many as 11 tankers that haven’t been sanctioned by the U.S. have recently joined the oil delivery route from Russia to China, including tankers that have previously carried Russian oil to India, according to LSEG data cited by Reuters.
“Surging freight rates after the sanctions have drawn clean vessels to join the Russian oil trade,” an anonymous China-based trader for a Russian supplier told Reuters.
“Shipowners bought more vessels to cash in the business,” the trader added.
Iranian crude oil shipments to China have also risen in recent weeks, thanks to the opening of new receiving terminals and more ship-to-ship (STS) transfers.
However, this week’s additional sanctions on Iranian shadow fleet could lead to another reshuffling of sanctioned and non-sanctioned tankers and tanker routes.
“With the US “maximum pressure” campaign beginning around Iranian exports, and the Chinese appetite for discounted barrels not retreating, it is undeniable that the logistics of the sanctioned trade will keep the demand for “clean” (unsanctioned) tonnage elevated,” Mary Melton, Senior Freight Analyst at Vortexa, wrote in an analysis this week.
