Russian oil vessels facing ‘difficulties’ bunkering in Singapore

INDUSTRY INSIGHT: RUSSIAN OIL AND SHIPPING Russian oil vessels facing ‘difficulties’ bunkering in Singapore

Shipowners walk away from charter deals as multiple shipping lines reject Russian bookings.

Is the ship sinking for Russian oil traders? This question has been floating around after multiple countries imposed restrictions on transactions with the Putin-led country amidst its invasion of Ukraine.

Whilst the answer to the question remains uncertain, one thing is clear: there have been disruptions in the flow of trade between Russia and other countries, including Singapore, which imports fuel oils from the western territory.

“Russian state-owned vessels are finding it difficult to stem bunkers according to our market checks,” Braemar ACM Shipbroking’s Head of Tanker Research, Anoop Singh told Singapore Business Review in an exclusive interview.

But bunkering is not the only thing slowing down following the sanctions. Singh said the flow of Russian oil will likewise decelerate in the short term given that prominent local banks in Singapore have been dialling back the pace of issuing letters of credit (LC).

In a separate interview, oil trader Siddiq Ahmed told Singapore Business Review that about 70% of oil business are done on letters of credit, thus a restriction on its issuance will affect trading flow.

“Because of [the] sanction, trade can’t be done directly or indirectly with any Russian entity,” Ahmed said.

Singh, for his part, explained that “payments for oil trade only get due, typically, after the cargo is loaded onboard, an LC opened for Russian energy flows today could very well be caught up in a fast-changing sanctions environment.”

“This uncertainty, plus additional checks required—such as to rule out the involvement of sanctioned individuals or entities in a trade—will slow clearances for Russian oil flows,” the Braemar official added.

Globally, Singh said a few current oil deals have already fallen through because of Russia’s attacks on Ukraine and the retaliatory sanctions imposed by other countries against the major oil producer.

“We are, for instance, aware of a ‘Western’ buyer and a shipowner walking away from a spot deal for which a tanker ship had been chartered,” Singh revealed.

Whilst there have been pullouts from buyers, Singh said there has also been a rush of tankers being chartered to load Russian crude.

“That is because for now, traders will need to meet their contracted supply commitments,” he added.

Are ports congested?

Despite a setback in oil trade and bunkering of vessels from Russia, Singapore ports have yet to see congestion, according to both Singh and Ahmed.

Singh, however, said there might be congestion in load ports in a few weeks since there has been a run-up in “spotfixing for Aframax and Suezmaxes,” which will “start to load by the end of next week.” (The interview was conducted on March 4 , 2022).

Meanwhile, Ahmed sees the rejection of multiple shipping lines for new bookings for Russia to clog ports not only in Singapore but worldwide.

Since there is also no clarity as to what is to be done on containers coming from Russia or going to Russia this could also cause issues on all major ports, including Singapore which is a transit hub.

So far, Singh said there have been no tankers loading from Russia bound for Singapore that has been “diverted,” adding that the Maritime and Port Authority of Singapore (MPA) has also yet to issue orders barring Russian cargoes being discharged in Singapore.

“Containers which already left Russia and for which financial settlement [was] done should not face much problem,” Ahmed said.

Overall, Ahmed said it is too early to say the kind of impact the Singapore sanctions against Russia will have on ports. “Port will be congested but in Europe mostly, not much impact in Asia,” he said.

Self-sanctioning is the game

The lack of clarity on retributions imposed by other countries on Russia has pushed players to impose a self-sanction.

Even without government sanctions, ship owners have “opted to lift Russian cargoes out of the Baltic and the Black Sea,” according to research by Fearnley Offshore Supply.

This is on the back of multi-year high rates for Afra- and Suezmaxes, following the conflict.

Refiners and traders have likewise shied away from Russian oil, Fearnley added.

“This is still not sanctioned, but amid[st] reported war crimes, it may come,” Fearnley said in its report.

Russia’s flagship crude oil grade Urals have received “low to no interest from buyers” despite its “price differential to Brent hitting another record of -$22,7/barrel,” Fearnley said.

Singh had the same observation on self-sanctioning, particularly on western buyers, adding that this will in turn accelerate flows of Russian oil to China and India.

Whilst there are pullouts from buyers, there is also a rush of tankers being chartered to load Russian crude

Anoop Singh

Because of sanctions, trade can’t be done directly or indirectly with any Russian entity