The market for old oil tankers is booming, and it’s all down to efforts by Western nations to curb trade in Russian crude.
As Western shipping and maritime services firms steer clear of Russian oil to avoid falling foul of sanctions or harming their reputations, new companies have leapt into the void, and they’re snapping up old tankers that might normally be scrapped.
The European Union banned all seaborne Russian crude imports from Dec. 5, with a fuel import ban to follow in February.
It also banned companies and individuals in the bloc from providing financing, brokerage, shipping and insurance services to ship Russian oil elsewhere if the crude was bought above a price cap of $60 a barrel that came into effect on Monday.
In recent months, ageing tankers have been sold by Greek and Norwegian owners for record prices to pop-up Middle Eastern and Asian buyers taking advantage of sky-high charter prices for vessels willing to ship Russian oil to India and China.
Tanker management companies such as Fractal Shipping, run out of Swiss financial hub of Geneva, are reaping the rewards.
In less than a year, Fractal has put together a fleet of 23 oil and fuel tankers bought recently by owners in Dubai. Most are taking Russian crude from Baltic and Black Sea ports to Asia, Refinitiv Eikon ship tracking showed.
Chief Executive Mathieu Philippe said he launched the idea for Fractal a year ago, betting that the global tanker fleet was getting stretched and that both the cost of vessels and freight rates would inevitably rise from pandemic lows.
But, by the middle of this year, new ship owners, known as principals, started asking him to get into the Russian oil business.
“We were given a lot of tankers in August and September. Our principals wanted to come into the business for the Russian opportunity,” the shipping industry veteran told Reuters.
Major Western oil companies typically stop using tankers when they are about 15 years old, and many would be scrapped. Fractal’s fleet, meanwhile, consists entirely of older vessels ranging from 13 to 19 years, Fractal’s website shows.
With new entrants keen to get a slice of the Russian business, second-hand oil tanker prices have surged, especially for Aframax vessels that can carry up to 600,000 barrels, the standard size used for loading crude at Russia’s Baltic ports. The price tag for 20-year-old Aframaxes has jumped 86% from $11.8 million on Jan. 1 to $22 million now, according to valuation company VesselsValue.
So far this year, 148 Aframax sales have been reported, a 5% increase from the same period in 2021, VesselsValue said.
Research by ship broker Clarksons showed that more tankers were sold in the first 11 months of 2022 than any full-year previously and sales in October set a new monthly record of 76.
Up until Dec. 5, there were no Western sanctions on transporting Russian oil to Asian markets, so Fractal and other management companies had not breached any rules.
To avoid potential pitfalls, though, Philippe said Fractal does not deal with any Russian-owned companies. That would also be a no-go for Western banks financing maritime trade, he said.
To prevent the new EU sanctions from halting millions of barrels per day of Russian crude exports and driving up global fuel costs, the Group of Seven (G7) rich nations has mitigated its impact by permitting exports below a cap of $60 a barrel. The aim of the plan is reduce to Russia’s export revenue but keep oil supplies flowing.—Reuters