The practice of using the world’s oldest and riskiest vessels to transport sanctioned oil is being challenged as an increasing number of tankers in the fleet become newer and safer, as published on GCaptain.
Scrutiny and Safety Concerns
Following Russia’s invasion of Ukraine, a significant number of ageing tankers were acquired by anonymous traders and investors to maintain the flow of Russian oil. These purchases, along with existing vessels transporting crude for Venezuela and Iran, resulted in the formation of a “dark fleet” consisting of over 900 ships. However, recent data indicates a shift in the trend, with the average age of purchased ships decreasing. This change is attributed to stricter regulations and detentions in Asia due to safety concerns. China, a major consumer of Russian and Iranian oil, has increased inspections on older tankers at the Qingdao port, leading to delays in unloading cargo. The explosion of a 26-year-old vessel off Malaysia in May has further raised concerns about the risks posed by ageing ships.
Shift to Newer Tankers
Singapore has also increased detentions of tankers that fail safety inspections, contributing to concerns about the seaworthiness of older vessels. However, the purchase of newer, well-maintained tankers is helping to alleviate worries among importers. The average age of tankers sold to undisclosed buyers, a characteristic of the “dark fleet,” has decreased from 19 years in October to 15 years currently, according to VesselsValue. This shift towards younger vessels is driven by safety concerns surrounding older ships.
Demolition Delay
The dark fleet tankers typically consist of older vessels lacking industry-standard insurance and Western services, with owners that are difficult to trace. These ships often surpass the typical scrapping age of 20 years. Countries like China and India have implemented strict regulations on older ships, with India banning vessels older than 25 years from entering its ports. However, some shipowners are becoming more comfortable with handling restricted crude, such as Russian flows, and are investing in younger ships that meet industry standards. Initially, purchasing the oldest vessels made sense for the Russian trade as they were the cheapest and could bypass certain sanctions. The surge in demand for ships has prolonged their lifespan, resulting in a seven-month period without any large crude tankers being scrapped, a phenomenon not seen since the mid-1970s.
Impact on the tanker market
Due to a shrinking pool of buyers for Russian crude since the war, tankers now spend more time in transit. Cargoes that used to have short journeys along the Baltic Sea now take weeks to reach destinations like China and India. As a result, benchmark oil tanker earnings have surged to around $100,000 a day on two occasions since the war began, compared to an average of $23,000 a day since 2017. The purchase of younger vessels further reduces the supply of ships for traditional trades, increasing the likelihood of rates returning to higher levels. The shift towards newer vessels is driven by safety concerns, as older tankers have been found to have multiple defects during inspections. Moreover, many of the older tankers suitable for the trade have already been acquired. This transition to newer ships not only leads to a tighter tanker market but also ensures a more reliable supply of oil from sanctioned countries.
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Source: GCaptain
