The product tanker market flows have changed considerably since the EU ban on Russian imports. In its latest weekly report, shipbroker Gibson said that “with the refined products price cap now in place for just over a month, the changes in trade flows as a result are stark. Many longer haul voyages are yet to be completed, but this only points to a clear trend of Russia being forced to divert cargoes to distant markets in order to maintain export volumes. Until February, Europe had remained Russia’s primary market for refined product exports; however, in the space of a month, a major pivot has been observed. Unsurprisingly, exports to Europe have dropped to almost nothing, with Africa and East of Suez emerging as Russia’s largest buyers, followed by non-EU/exempt markets in the Mediterranean (i.e. Turkey). Surprisingly, less cargo than expected is destined for Latin America, whilst a large portion remains unaccounted for, suggesting these volumes are in transit to longer haul markets”.
Source: Gibson Shipbrokers
According to Gibson, “despite the need to find new markets for over 1 million b/d of clean products, the early signs indicate that Russia has been relatively successful, with volumes for February higher than the average for all of 2022. This has been aided by notable changes in the ownership of the product tanker fleet, and the willingness of some western players to participate in the Russian market, presumably within the price cap framework. Gibson has so far tracked over 120 MRs and Handies involved in Russian refined product exports and at least 21 LR2s, with more vessels signalling Russian load ports in the coming week”.
The shipbroker added that “much of the product heading East is expected to end up in the Middle East, most notably unfinished products and blending components. The region could become a blending hub, whereby Russian components are transformed into on spec products for re-export across the world. If this materialises, traditional Western export markets could see “Middle East” gasoline competing with US and European supplies, perhaps even into the United States itself despite the origin of the finished grades’ original components”.
“Looking ahead, the trends which have emerged in February are likely to become established for the foreseeable future, with some potential upside to Latin America. However, much depends on Russia’s export strategy and ability to maintain refining runs and Western Government’s willingness to allow Russian products to be rebranded and re-exported overseas. In any case, the refined products price cap has created additional inefficiencies in refined products trade, which are unlikely to be reversed anytime soon, if ever”, Gibson concluded.
