Small tankers and ship-to-ship transfers are being used to keep the flow of Russian oil to China steady, Bloomberg reported this week, citing sources from the brokering industry.
Typically, the report notes, Russian ESPO crude is shipped directly to China. But lately, buyers are opting for loading the crude on small tankers and shipping it to South Korean waters, from where it is loaded onto supertankers and then taken to China.
According to Bloomberg’s sources, the change is a result of reprioritization among buyers as shipowners avoid loading Russian oil because of Western sanctions. Currently, almost all of the ESPO available for sale is going to China.
The ship-to-ship transfer tactic was and probably is still being used by Iran to ship its oil abroad—to China again—to avoid stifling U.S. sanctions on its oil industry. The sanctions against Russia do not target oil and gas directly, but they do target the shipping industry, which explains shipowners’ unwillingness to risk loading Russian crude.
This is where the small tankers that are readily available come in, as do China-owned supertankers sitting idle because of the decline in imported oil demand amid the latest wave of lockdowns, Bloomberg also wrote.
China, as well as India, has emerged as the most logical buyer of discounted Russian crude after the sanctions entered into effect. While the European Union discusses imposing an embargo on Russian crude, China is happily stocking up on the commodity, taking advantage of the discount price in an otherwise high-oil-price environment.
According to analysts, Russia could lose some 3 million bpd in oil production during the second half of the year because of EU sanctions. China and India on their own would not be able to absorb the oil that the West is shunning, they say, which would mean a loss of spare capacity for Russia as it would be forced to shut in wells.
