MOSCOW (MRC) -- Global fuel suppliers are turning to longer and costlier routes that produce more carbon emissions to move their diesel and other products as Western restrictions on Russian cargoes have reshuffled global energy shipping patterns, said Hydrocarbonprocessing.
As a result of the European Union ban on Russian fuel that started on Feb. 5, tankers carrying clean oil products such as gasoline, diesel, jet fuel and naphtha are travelling between 16 and 18 days to bring Russian supplies to Brazil or U.S. cargoes to Europe, according to two shipping sources.
That is up from the four to six days a ship used to travel from Russia to Europe, said the two sources, a broker at a major shipbroking firm and a charterer involved in the Russian trade of naphtha, which is used to make plastics and petrochemicals. The ban comes on top of a halt late last year on Russian crude sales into the bloc as well as Western price caps.
Since the start of the ban, the Clean Tanker Index published by the Baltic Exchange, which measures average freight rates for shipping fuels like gasoline and diesel on some of the most common global routes, has more than doubled.
The redrawing of the shipping map underscores the knock-on effects of Western efforts to punish Russia over its invasion of Ukraine last year, adding to fuel supply insecurity and pushing up prices even as policymakers worry about inflation and the risk of a global economic downturn.
"Not only are voyages much longer, but vessel behavior has also changed, keeping vessels from operating in other CPP (clean petroleum product) markets," Dylan Simpson, freight analyst at oil analytics firm Vortexa, wrote in a March 31 note.
Russian cargoes of fuel are heading to far-flung buyers in Brazil, Turkey, Nigeria, and Morocco as Moscow compensates for the lost European business, while Europe is importing more fuels such as diesel from Asia and the Middle East, according to shipping data from Refinitiv and Kpler.
Asian cargoes, in turn, are being displaced by Russian fuels in Africa and the eastern Mediterranean, and redirected to the blending hub of Singapore for temporary storage, two northeast Asian refinery sources said.
European importers whose naphtha cargoes travelled from Russian ports to Antwerp in four days before Russia's invasion of Ukraine now must wait 18 days for alternative supplies from the United States, the shipbroking source said.
The U.S. is also emerging as a top supplier of heavy naphtha to Europe amid the EU ban, while the Group of Seven Nations, EU and Australia have capped Russian naphtha prices at $45 a barrel and diesel and gasoline at USD100 a barrel for trades that use Western ships and insurance. Meanwhile, Brazil, traditionally a U.S. naphtha importer, is boosting purchases from Russia at more attractive prices.
However, the journey from Russia to Brazil can take 18 days or longer and, at up to USD7 million per voyage, the costs are nearly double that of a U.S. shipment, the ship charterer involved in the Russian market said.
Brazil received around 240,000 tons of Russian diesel and gasoil in the first three weeks of March, accounting for a quarter of Brazilian imports, up from Russia's 12% share in February and less than 1% last year.
We remind, Singapore's imports of Russian naphtha nearly tripled in the first quarter of 2023, government data showed, after the European Union banned oil products imports from Russia. The Asia oil hub imported 741,000 tons of Russian naphtha in the period, accounting for about 23% of Singapore's total imports of the refined product, a Reuters calculation based on Enterprise Singapore data showed. This jumped from about 261,000 tons imported in the fourth quarter last year, the data showed.