Oil Prices in the West: Implications of Russian Oil Decay on the Global Economy and the Russian-Ukrainian War in Ukraine
Buyers in Asia have cut deals as Europe has stopped buying Russian energy. China’s imports of Russian oil increased by more than 20% to 1.9 million barrels per day in the year after. India ramped up purchases even more sharply, logging an 800% increase to an average of 900,000 barrels per day.
Futures prices for Brent crude, the global benchmark, jumped 2.7% on the news Friday morning to $86 a barrel as traders anticipated a tightening in global supply.
In June last year, the European Union agreed to phase out all seaborne imports of Russian crude oil within the following six months as part of unprecedented Western sanctions aimed at reducing Moscow’s ability to fund its war in Ukraine.
Moreover, experts have said the shadow fleet may be easing Russia’s ability to dodge sanctions or sell its oil above the price cap. It can be difficult to know how much Russia’s barrels are selling for. Customs data shows that Urals is selling for more at key ports than official prices suggest.
A potential drop in global oil supply could come at a tricky time. China reopening of its economy in December has boosted estimates for global oil demand.
Last month, the International Energy Agency said it expected global demand to surge by 1.9 million barrels per day to reach an all-time high of 101.7 million barrels per day, with China accounting for nearly half of the increase.
Russia’s shadow fleet of dark ships: what’s going on in the past? The case of the dark ship phenomenology
Western sanctions — added to the grinding cost of war — are weighing on Russia’s economy. The country’s budget deficit ballooned to $45 billion last year, or 2.3% of its gross domestic product.
There are a lot of these ships that are not known who owns and operates them. As trading Russian oil became more complex over the past year, many Western shippers withdrew their services. New, obscure players swooped in, with shell companies involved in some cases. Some bought boats from Europeans, while others tapped old, creaking ships that might have otherwise ended up in the scrapyard.
Industry insiders reckon that the fleet is 10% of the world’s large tanker fleet. And numbers continue to climb.
The boats need to be good for the trip. Russia’s national fleet doesn’t have enough vessels. The “shadow fleet” comes in.
The dark ships are often disguising their activities by turning off their transponder, which is related to technology that helps identify and locate vessels.
The Russian Dark Fleet as a Probe of the Laws and the Security Risks of the High-Energy Phenomenology
The legal risks of failing to comply with the price caps loom large. At the same time, Russia is eager to stop working with Western shippers. The development of a new cohort, whose makeup is murkier and history checkered, has been led by that.
The dark fleet carrying crude from Venezuela and Iran has grown as expected, said Janiv Shah, senior analyst at Rystad Energy.
“You’ve got all these old vessels that are probably not being maintained to the standard they should be,” said Matthews of EA Gibson. As the fleet grows, there is a chance of a major spill or accident.