The next energy market crisis: the shortage of oil tankers

In the new age of energy shortages, one aspect of the situation has been overlooked: energy transfer.

The demand for tankers has been increasing since the European Union imposed sanctions on Russia in the spring, and this trend will only increase in the coming months with the entry into force of an EU embargo on Russian oil and fuel.

Bloomberg mentioned This week, shipping companies were scrambling to get as many ice tankers as possible ahead of the ban, which goes into effect in early December on crude and two months later on fuel.

The report indicated that the ships will be necessary to continue transporting Russian oil and fuel in non-European directions, because the European Union will not be able to purchase them, although European buyers are currently stockpiling Russian oil and fuel in anticipation. the ban.

The war in Ukraine and the European Union’s response to it have already greatly invigorated the global tanker market — and with it, hydrocarbon shipping costs.

Since the February 24 invasion, demand for tankers has soared and is likely to remain strong for the foreseeable future, not least because supply is very limited, says Tor Svelland of Svelland Capital. Tell CNBC in August.

Few tankers have been built in the past few years, and since this is not something the industry can reverse overnight, supply will likely remain tight, driving up the cost of transporting oil and fuel.

In fact, in early August, Bloomberg again mentioned The global tanker market has been experiencing the strongest demand for more than two decades. Citing data from Clarkson Research Services, the report said the average profit for an oil product tanker in the two weeks to August 8 jumped to $400,000 – the highest level since 1997.

For now, this number is likely to be higher, and will continue to rise as fuel demand outpace supply in the coming months. The fuel market is already tight, but with the entry into force of the EU’s fuel embargo on Russia, it will become tighter, intensifying competition for a limited fleet of fuel tankers.

“The EU ban on Russian oil products from February 2023 will recalibrate the oil trading ecosystem,” Danish shipping company TURM said in a statement. quoted by Bloomberg. “I’ve already started some of these commercial recalibrations.”

Recalibration will include not only more tankers to carry Russian fuel and crude to non-European destinations but also more tankers to supply Europe with oil and fuel from non-Russian locations, including, likely, places like China and India that process Russian crude. In fuel, they then export it to Europe, among other countries.

On top of this expected tightness in the tanker market, which will have an appreciable impact on fuel prices, the global fuel market is also tight and likely to remain so in the coming years.

According to a Reuters report citing Standard & Poor’s research, the reason is a record drop in global refining capacity of 3.8 million barrels per day between March 2020 and July 2022, according to Reuters. Report Quoted from S&P Research.

While refining capacity has shrunk, fuel demand has increased by 5.6 million barrels per day, creating a huge gap with the supply based on refining capacity. New refining capacity of about 2 million barrels per day should start by the end of next year unless there are delays, which is highly likely, according to S&P research.

Additional capacity increases are unlikely as refiners suspect that the energy transition boost will turn potential new refineries into stranded assets before long.

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In this case, the future does not look good for fuel affordability or widespread availability. With the European Union’s oil and fuel embargo in place, Russia will be turning to new customers in Asia and Africa, according to Bloomberg in Latin America. The EU itself will need to source its fuel from places like the Middle East, the United States, and, as mentioned, from India and China.

Because of the limited supply situation, which will certainly add a premium to fuel prices, it is not unreasonable for countries that import fuel from Russia, such as the two Asian giants and Saudi Arabia, to choose what China does. Do Using Russian LNG: Resell it to Europe at a higher price.

Meanwhile, the United States has its own limitations with regard to fuel stocks, particularly those of middle distillates, diesel and jet fuel. What this means for Europe is that the help it can expect from the United States in the form of higher fuel exports will be limited: there is simply Not enough diesel fuel Export. This may add another premium to fuel prices this winter.

Tankers and the fuels in between are about to increase the cost of fuel this winter as the world tries to combat inflation. Tankers and fuel will not help in that fight.

By Irina Slough for Oilprice.com

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