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FT: Russia forms shadow oil tanker fleet

03 December 2022

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Business FM on the reasons for and consequences of introducing a “price ceiling” on Russian oil at $60 per barrel:

- Since the price ceiling is now set at or even significantly below the average selling price of Urals, according to various estimates, Russian companies will obviously continue to massively use European freight in the coming weeks and even months. That is, they receive, in fact, a delay in order to solve the current problem of diverting supplies from Europe of 700 thousand barrels per day, which fall due to the embargo introduced from December 5. Plus, about 150 thousand barrels will be added to this after Germany and Poland stop importing Russian oil through Druzhba, this will happen from January. Now there is no threat that there will be an acute shortage of tankers due to the refusal of European companies to work with Russia. This problem will be postponed until spring, apparently, so the companies still have time to find tankers on the market. This is not an easy task, although the shadow market for tankers is quite large, but these are, as a rule, very outdated vessels, many of them simply need to be written off, that is, they require repairs, at least quite expensive maintenance. The question arises to what extent these vessels, which are currently being purchased, can be used promptly. That is, if we imagine that Russian companies completely stop working with European freight - Greece, Cyprus, Malta - there will be a deficit anyway.

- How does Russia respond to the ceiling?

— Nowhere in the contracts with contractors, be it insurance companies or freight, is it stated that the counterparties are somehow politically biased and adhere to the price ceiling, that you can’t work with them. Companies also do not record anywhere that they work and will work taking into account the price ceiling. If the market price for the sale of Russian oil falls within the price ceiling, then nothing will be fixed anywhere and nothing will be changed.

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