By Maggie Johnson
January 17, 2025
Russian crude oil is piling up near the Chinese coast as traders, refiners, and shipping companies navigate the toughest US sanctions yet on Russian energy exports. Approximately 4 million barrels of ESPO and Sokol crude from Russia's Far East, spread across five tankers, remain idle in Chinese waters, according to Bloomberg and Kpler ship-tracking data. Notably, four of these vessels are under US sanctions.
Since the US imposed sanctions on over 180 tankers, traders, and insurers last Friday, companies involved in the Russian oil trade have been demonstrating their resilience by actively seeking alternatives. Although a wind-down period allows crude offloading before penalties take effect, many ports in Shandong province—a hub for independent refiners—are hesitant to handle these shipments. This caution follows warnings from a major terminal operator about potential risks.
Shipbrokers predict a rise in ship-to-ship oil transfers and the increased use of smaller ports as companies seek ways to circumvent the sanctions. This shift towards smaller ports not only demonstrates the industry's adaptability but also opens up new opportunities. Russian Far East crude remains attractive to China's "teapot" refiners due to its affordability and the short travel distance.
The volume of stranded oil has nearly doubled within days and is expected to grow further. This figure excludes crude on the Madestar, a very large crude carrier that recently completed a ship-to-ship transfer with another vessel transporting ESPO crude. Additionally, three more tankers carrying this grade are scheduled to offload in China in the coming days, indicating a potential growth in ship-to-ship oil transfers as a viable solution.
The mounting backlog underscores the significant disruptions caused by the sanctions and highlights the challenges faced by China's refiners in securing Russian crude while avoiding entanglement in US penalties.
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