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Saturday, April 2, 2022

On Its Way to the U.S., Russian Oil Tanker Makes Giant U-Turn

The ship, originally sailing to Philadelphia, apparently lost its buyer in the middle of the Atlantic. A number of tankers carrying Russian oil face similar problems.

A tanker loaded with one million barrels of Russian oil set sail from Murmansk this month, headed for Philadelphia. Then, in the middle of the Atlantic, it did an abrupt U-turn.

Oil Tanker Takes a Meandering Path In the Atlantic








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The ship, Beijing Spirit, had apparently lost the buyer for its oil. It removed “Philadelphia” as its listed destination, according to to the global maritime data provider MarineTraffic, and listed its new destination as “For Orders,” which indicates that the oil on board is for sale. The tanker then veered back toward Europe before spending several days bouncing round the Mediterranean, “presumably hoping to offload in more ‘friendly’ territory,” said John van Schaik, an oil-industry expert at the energy information company Energy Intelligence.

The meandering journey offers a glimpse into the tumult that has roiled the trade in oil, Russia’s most lucrative export, as the United States, Canada, Britain and Australia move to ban imports of Russian oil because of Russia’s invasion of Ukraine.

Overall, more than 20 tankers that have departed from Russian ports since the invasion — together carrying almost 8.5 million barrels of oil — now list their status as “For Orders” or “Drifting,” which indicates a lack of destination, according to the Russian Tanker Tracking Group, an initiative led by the Ukraine government to observe Russian oil sales. Other tankers now list final destinations like “ZZZ.”

Mr. van Schaik said it was uncommon to see so many tankers sailing under “for orders” status, and it likely had to do with the U.S. ban on Russian imports combined with self-sanctioning among oil companies. (Tankers sometimes do change destinations or are turned back if there is a mishap at the accepting refinery, for example.)

It’s not always possible to know where the oil will end up, he said, but traders could quietly sell it to refiners that cared less about their reputation than about price. “Once you put the crude somewhere in a tank on land, it is anonymous,” Mr. van Schail said. “You blend it with some other crude, load it on another tanker and sell it as European Sour Blend and nobody knows its origin was Russia.”

At the same time, at least seven tankers are still sailing toward the United States to offload their shipments before the U.S. ban on Russian oil takes full effect on April 21.

The United States imports only a small fraction of its oil from Russia, but nevertheless gasoline prices in America have been soaring in part because of the uncertainty over global supplies caused by the Ukraine invasion. On Thursday, President Biden, under pressure to bring down high American gasoline prices, said that the United States would release up to 180 million barrels of oil from its emergency reserves, a release at an unprecedented scale.

But in fact, Russia — the world’s third largest oil producer behind the United States and Saudi Arabia — is still exporting plenty of oil. Despite the global condemnation of Russia’s attack on Ukraine, Russian exports of oil and oil-derived products have yet to show a significant decline, according to data from Kpler, the commodity data and analysis firm.

Some countries, like India, Singapore and Turkey, have sharply increased their receipts of Russian oil in the weeks since the invasion, according to a separate tally by a Ukraine-led effort to investigate the companies and countries that continue to buy and sell Russian oil and gas. And the European Union has been unable to agree on an oil embargo among concerns that such a move would push economies in to recession, though Germany has said it intends to phase out Russian oil imports by the end of the year.

Loic Venance/Agence France-Presse — Getty Images

Oleg Ustenko, economic adviser to Ukrainian president Volodymyr Zelensky, said in an interview from Kyiv that the oil trade means Russia is continuing to earn foreign currency to fund its war against Ukraine. Oil and gas revenues made up almost half of Russia’s federal budget in 2021.

“Whoever is buying this oil is financing war crimes,” he said. “We’re tracking every ship loaded with Russian oil.”

The big question is what happens next.

Last month, the International Energy Agency projected that Russian oil exports would fall significantly by April as sanctions take hold and more buyers shun exports. That shortfall could reach 3 million barrels a day, and could trigger a global oil supply shock, the energy agency said.

But Russia is defying those expectations. A port loading schedule obtained by Energy Intelligence shows that major Russian ports plan, at least on paper, to export almost 2.9 million barrels of oil a day in April, up significantly from both the previous month and from the same period last year.

Much of that demand is expected to come from Asia. India’s purchases of Russian oil, in particular, has jumped more than 700 percent in the five weeks since the start of the war in Ukraine compared to the previous five weeks, according to data from the Russian Tanker Tracking Group.

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