As a
result of the European Union ban on Russian fuel that started on February 05,
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 US 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.
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 US
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 US$45 a barrel and diesel and gasoline at US$100 a barrel for trades
that use Western ships and insurance. Meanwhile, Brazil, traditionally a US
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 US$7 million per voyage, the costs are nearly double
that of a US 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,
said Benedict George, head of diesel pricing with energy and commodity data
provider Argus.
"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," tanker broker E A Gibson said in a recent
report.
Measured in terms of cargo miles, which multiplies the cargo
quantity in metric tons by the distance travelled in nautical miles, the amount
of Russian oil product shipments to Brazil in March rose to 3.07 billion metric
ton-nautical miles (MT-NM) from 941 million MT-NM in November, according to
data from valuation company VesselsValue. Shipments from Russia to Nigeria rose
to 1.88 billion MT-NM in March from zero in November, VesselsValue estimates
showed.
Clean product cargoes to Saudi Arabia in March jumped to
1.75 billion MT-NM from 31 million MT-NM in November, while shipments to the
United Arab Emirates were 4.43 billion MT-NM in March, up from 2.85 billion
MT-NM in November, the data showed.
Also in March, Russian clean products shipped to Togo
reached 973 million MT-NM, up from zero in November. In volume terms, Brazilian
imports of oil products from Russia were about 284,000 tons in February, up
from 73,300 tons in September, VesselsValue data showed. Conversely, Russian
exports to the Netherlands dropped to 238,200 tons in February from 1.15
million tons in September.
Those longer distances are being done at higher costs for
Russian products than for typical shipments from Europe.
According to market estimates, freight rates for the
UK/European continent to West Africa are quoted at US$55.77 per ton for a
product tanker with a standard 37,000-tonne load. This compares with an indicative
rate of US$174.24 per ton for shipments from Russia's Baltic ports to Nigeria, US$103.84
for Morocco and around US$150 to Egypt.
With ships travelling further, that is also likely
translating into greater emissions from smokestacks.
Based on pre-pandemic data, a 10% increase in mileage for
all tankers travelling to and from the European economic area would increase
their emissions by around 1.5 million tons of carbon dioxide, equal to the
emissions of around 750,000 cars per year in Europe, said Valentin Simon, data
analyst with the Transport & Environment think tank in Brussels.
