Page 28 - bne IntelliNews magazine February 2025

28 I Cover story bne February 2025
Freight rates for Very Large Crude Carriers (VLCCs) that can carry 2mn barrels of crude jumped after Unipec, the trading arm of Asia's largest refiner Sinopec, chartered several supertankers on January 10, Reuters reports. On
a daily basis, the rate on the Middle
East to China route, known as TD3C,
has surged 39% since the sanctions announcement to $37,800, the highest since October, a shipbroker told Reuters.
At the same time, shipping on Russia’s east coast, which is outside the European sanctions reach, have also soared. The freight rates for Aframax- size tankers to ship ESPO blend crude from Russia's Pacific port of Kozmino
to North China more than doubled on January 13 to $3.5mn as shipowners requested massive premiums due to limited tonnages available for that route, according to S&P Global Commodity Insights data, Reuters reports.
The rate for VLCCs from the Middle East to Singapore has gained the most, up worldscale (WS) 11.15 on January 10 to WS61.35 on January 14 – an industry tool to calculate freight charges, Reuters said.
Tightening the oil price cap noose
The sanctions will have a knock-on effect on Russia’s biggest customers, with India expecting disruptions to supply in the short term when the sanctions come into effect at the start of March, but China seeing bigger problems in the medium term, say analysts.
India has halted negotiations for March supplies of Russian oil and is looking for alternatives, according to the report.
Demand from Russia’s other major buyer China is also uncertain and could blunt the impact of the tighter supply. China's crude oil imports fell in 2024 for the
first time in two decades outside of the COVID-19 pandemic, official data show.
Six EU countries called for the G7 to tighten the noose around Russia’s neck and further lower the oil price cap from $60 per barrel. Some have suggested the bar should be dropped to $40 to cut Russia’s income.
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"Measures that target revenues from the export of oil are crucial since they reduce Russia's single most important income source," Sweden, Denmark, Finland, Latvia, Lithuania and Estonia said in a letter to the EU executive arm, Reuters reports.
The twin price cap sanctions on crude and refined products were introduced on December 5, 2022 and February
5, 2023 respectively. As the market is already oversupplied with oil, that has given the West more wiggle room to impose even tighter sanctions on Russian exports and so easier to avoid a repeat of the price shock that roiled markets in 2022.
"The international oil market is better supplied today than in 2022, reducing the risk a lower price cap will cause
Finland – want Europe to end Russian gas imports, in any form, completely, in order to end revenues paid by Europe to Russia completely. Moscow has earned an estimated €92.3bn between the onset of the conflict and November 3, 2024, Statista reports. But banning Russian imports of gas will be hard as Europe remains hooked on Russian gas. Spain, France and Belgium continue to be the main partners, accepting Russian LNG shipments.
"As an end goal, it is necessary to ban the import of Russian gas and LNG at the earliest date possible," the countries said in a joint paper seen by Reuters.
Ukraine ended gas transit to Europe from Russia on January 1, but attempted to destroy the remaining transit pipeline, TurkStream, and end Russian exports of gas to the EU completely.
“Measures that target revenues from the export of oil are crucial since they reduce Russia's single most important income source”
a supply shock," the letter of the six countries said. "In view of limited storage capacity and its outsized dependence on energy exports for revenue Russia has no alternative
to continue oil exports even at a substantially lower price," the letter said.
Russian gas exports also in the
firing line
Gas is also in the firing line. Ten EU member states also called for the first sanctions to be imposed on Russian LNG exports. Currently the West has imposed no sanctions on Russian gas and the EU remains dependent on imports to meet its winter heating needs. The EU is preparing its sixteenth package of Russian sanctions ahead of the third anniversary of Moscow's full-scale invasion of Ukraine in February 2022.
The ten countries – including the Czechia, Denmark, Estonia, Ireland, Latvia, Lithuania, Poland, Romania, Sweden and
Ukraine sent nine drones to attack the TurkStream pipeline on January 13 that attempted to blow up one of the pipeline’s compressor stations in the Krasnodar region of southern Russia. Russia’s Defence Ministry said all nine drones were shot down without reaching their target. Kremlin spokesman Dmitry Peskov called it an "act of energy terrorism".
He said Russian Foreign Minister Sergei Lavrov and Gazprom CEO Alexei Miller had discussed the alleged incident with their Turkish counterparts.
Gas exports via pipelines from Russia to Europe in 2024 increased by 14%
to 32.1bn cubic metres, according
to data from Gazprom and the European Network of Gas Transmission System Operators (ENTSOG), reports Vedomosti.
The main growth in 2024 came from supplies via the Turkish Stream gas pipeline and its extension through the Balkans which jumped to the number