According to Gibson, since the start of the war, “tanker tonne miles (/CPP) grew 5.4% in 2022 following the invasion and by 7.2% in 2023 after the implementation of the /US embargo on Russian oil and oil price cap framework. Whilst not all this growth was attributable to the war, the majority was, particularly in 2023. Tonne mile growth has since slowed, gaining just 1% in 2024, and contracting 1% for the year to date”.
However, according to the shipbroker’s analysis, “it remains heavily debated whether trade flows might return to “normal” in the event of a peace deal. The current leaders of the UK, France, and Germany, as well as the Baltic and other EU States might try particularly hard to prevent a swing back to Russian energy trade, especially in the event of a “bad deal” for Ukraine. The recently published 28-point plan sets out to reintegrate Russia into the global economy whilst fully lifting sanctions. However, it was reportedly produced without European input. Further, it is unclear what the 19-point counterproposal contains as well as whether Europe had a hand in writing it, let alone Russia. Thus, it remains unclear what the European towards Russia and its energy exports will be”.
“If it is assumed that any deal is likely to involve sanctions relief, then some normalization in trade flows is possible. The key, however, would be whether European refiners are allowed to return to Russian crude supplies. If this were to be the case, then over time trade flows might shift to resemble something similar (but not the same) as their pre-war patterns. Next year, European refining throughput will be 500kbd lower than in 2022, as closures in Germany are likely to offer reduced scope for Russian pipeline flows to return to previous levels. Equally, other producers (notably the US) have captured market share in Europe and will need to be displaced. On the CPP side, tanker tonne miles surged as Europe scrambled to replace Russian supplies in 2023 with cargoes from the Middle East, India, and the United States. At the same time, Russian cargoes which typically traded into Europe were pushed to new markets in Latin America, Africa and Asia creating substantial inefficiencies to the benefit of tanker owners and traders. Refining margins in Europe (and worldwide) also benefitted initially and would likely come under pressure if Russian supplies return to Europe, and especially if Ukrainian drone strikes on Russian refineries cease. As a result, we could see lower long-haul imports. The overall impact would be significantly lower tonne miles. As such, in terms of tonne miles, the reaction of European leaders is of utmost importance. If Europe lifts its current embargo on Russian oil, this will have significant negative implications for tanker demand”, Gibson noted.
According to the shipbroker, “for crude tankers, Aframaxes, followed by Suezmaxes were initially the greatest beneficiaries of the conflict, whilst VLCCs lost market share. As major VLCC destinations, India and China might have preferred to continue to use larger tankers, but given Russian port restrictions, were required to switch to Aframax and Suezmax tonnage. This dynamic has recently shifted, as tighter sanctions have forced China and especially India to increase crude imports sourced from non-Russian suppliers, benefitting VLCCs.
Thus, any further increase in Indian or Chinese buying from outside Russia, may still benefit VLCCs more than other sizes, yet smaller crude carriers are set to lose, with Aframaxes the most vulnerable”.
Meanwhile, “for clean tankers, LR2s and MRs saw the strongest gains in tonne miles as the refined products price cap came into effect. MRs may see less downside from reverting trade flows, given they could be redeployed on Russian exports to Europe, whilst MRs in the US Gulf would also gain back some market share in Latin America. For LR2s it is difficult to find a positive outlook, with LR2s feeling the brunt of any decline in trade from the East to Europe”, Gibson said.
“Once again, we now face an uncertain period where negotiations between the US and Russia, with or without Ukrainian and European involvement, could lay the foundations for an end to hostilities. It is impossible at this stage to determine what the final settlement might look like, and most importantly, what Europe’s policy towards Russia and its energy exports will be. In the meantime, Europe is working on its 20th sanctions package, and whilst Trump seems to want to reintegrate Russia into the global economy, further US sanctions are not off the table either”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
