- Tanker demand rises despite export losses.
- Floating storage surges as buyers hesitate.
- Loss of European tonnage tightens vessel availability.
Russian crude liftings have plummeted by 40% following the announcements of US sanctions, as buyers either pull back or look for steeper discounts. Even with exports down, the demand for tankers has surged due to the high volumes already on the move and the increasing floating storage, reports Break Wave Advisors.
Rising Storage and Vessel Inefficiency
The amount of Russian crude on the water has hit a 2.5-year high, with floating storage nearly doubling. Tankers are spending more time sitting idle as buyers postpone discharge. The shortage of vessels has worsened due to the loss of European-operated tonnage that was previously utilised under the price cap.
Shadow Fleet Set to Expand
With fewer compliant vessels available, Russia is likely to acquire more second-hand tankers and integrate them into the shadow fleet. The high utilisation of existing vessels and the reduced number of ballasting ships returning to load will further strain capacity.
Increased STS and Dark Fleet Tactics Likely
Russia may ramp up STS transfers in the Gulf of Oman, near Suez, or in East Asia to expedite the shadow fleet. We can expect more shadowy practices—like AIS spoofing, name changes, and opaque STS, as sanctions continue to tighten around nearly all Russian producers.
Production Cuts Unlikely
It seems unlikely that Russia will cut production, even with a lack of buyers. Onshore storage is only half utilised, providing ample room to hold unsold crude. While sustained Ukrainian strikes on storage could change this, any impacts would take time to materialise.
Asian Buyers Hesitant Despite Discounts
Urals discounts have widened to over $25 per barrel, yet many Indian and Chinese refiners are steering clear of December and January cargoes. Some trade might shift through new intermediaries, but the risk of US secondary sanctions could limit this route.
Outlook: More Shadow Fleet, Tighter Compliant Fleet
An increasingly inefficient supply chain, reliance on STS, and the need to keep exports high suggest a growing demand for the shadow fleet. The addition of more vessels to the dark fleet will tighten capacity in the compliant tanker market in the coming weeks.
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Source: Break Wave Advisors
