Commodities
Analysis-Russian oil flows through Red Sea still face lower risks
© Reuters. FILE PHOTO: A tanker crosses the Gulf of Suez towards the Red Sea before entering the Suez Canal, in El Ain El Sokhna in Suez, Egypt, September 25, 2020. REUTERS/Amr Abdallah Dalsh/File Photo
By Natalie Grover, Robert Harvey and Ahmad Ghaddar
LONDON (Reuters) – Tankers carrying Russian oil have continued sailing through the Red Sea largely uninterrupted by Houthi attacks on shipping and face lower risks than competitors, according to shipping executives, analysts and flows data.
Russia has become more dependent on trade through the Suez Canal and the Red Sea since it invaded Ukraine, which led to Europe imposing sanctions on Russian imports and forced Moscow to export most of its crude to China and India. Before the war, Russia exported more to Europe.
The number of Russian ships passing through the Red Sea has registered a slight decline since December, according to oil analytics firm Vortexa, but traffic last week was still around 20% higher than on average in 2023.
That contrasted to more extensive disruptions overall to oil tanker sailings through the Red Sea in the past two weeks.
Shipments of diesel and jet fuel from the Middle East and Asia to Europe – one of the major east-to-west oil trade routes – nearly came to a halt in the days following the first round of U.S.-led retaliatory strikes on Yemen on Jan. 11, Vortexa data show.
Russia has close ties to Iran, which backs the Houthis, and that may have helped prevent attacks.
Ships carrying Russian oil for the most part have no links to Israel, the United States or Britain. The Houthis have said they are targeting ships connected to those countries in attacks to show solidarity with Palestinians in Gaza.
G7 sanctions on Russia’s oil trade over the Ukraine war contributed to rapid growth in the shadow fleet of vessels transporting sanctioned crude and fuel. Those vessels are leased by companies typically registered outside countries that have imposed sanctions on Russia. They also use maritime services and insurance from countries that do not impose sanctions.
With fewer clear connections to Western companies, those vessels are less likely to be a target.
“Most Russian crude and fuel is transported by the shadow fleet, so its unlikely going to be in the crosshairs of Houthi attacks,” said veteran oil trader Adi Imsirovic.
“The Houthis are targeting ships linked to certain countries.”
Many vessels carrying Russian cargoes are indicating they are not tied to Israel via signals from automatic identification systems (AIS) – which publicly broadcast information including a vessel’s position and destination, Vortexa analyst Mary Melton said.
Russia, a partner to key Arab powers like Saudi Arabia and the United Arab Emirates in addition to its ties with Iran, has condemned what it called the ‘irresponsible’ strikes.
Chinese officials have put pressure on Iran to rein in attacks on ships in the Red Sea and ensure those attacks do not hurt Chinese interests, Iranian sources and a diplomat told Reuters last week.
ATTACK
A Houthi attack late last week on a tanker carrying fuel which originally loaded in Russia was unlikely to impact wider Russian trade flows as that specific vessel was targeted because it had ties to British and American companies, Vortexa’s Melton said.
“The tanker had ties to both US and UK based corporate entities, so other vessels carrying Russian cargoes without these ties do not face a similar risk,” she said.
The attacked tanker Marlin Luanda is owned by Oceonix Services, a company registered in the UK to a London address, according to data from another tracking firm Kpler.
Global commodities trader Trafigura, which owned the cargo, said it was assessing the security risks of further Red Sea voyages.
Four tankers carrying Russian Urals crude passed through the Bab-el-Mandab strait with another three heading south through the Red Sea since the attack on the Trafigura vessel on Jan. 26, Kpler data show.
The flow of Russian oil should continue provided it makes economic sense and insurance cover can be procured given the level of demand from India and China, Ian Wilkinson, VP of sales excellence at Inchcape (OTC:) Shipping Services told Reuters.
Western tankers, however, will likely re-route away from the Red Sea and sail around the Cape of Good Hope, said Shefali Shokeen, a lead shipping analyst with a Dubai-based shipowner.
Either way, shippers are facing higher costs. In the Red Sea, shipowners are charging higher freight rates and crew fees, and war risk insurance premiums have surged.
Crew fees have doubled, while war risk premiums now amount to around 1% of the value of a ship, versus 0.5% about 10 days ago, excluding discounts, according to industry sources.
For instance, costs to charter 1 million barrel-capacity Suezmax ships to send Iraqi oil to Mediterranean refineries have climbed by $2.50-$3.50 a barrel for freight, while insurance has roughly tripled to between 10 and 15 cents a barrel, according to a trader with a European refiner.
The alternative route via the Cape of Good Hope adds two to three weeks to sailing time and an extra 3,300 nautical miles in fuel consumption, in addition to emissions taxes for those owned by or calling at EU states.
Investing.com– Oil prices slipped slightly lower Monday, as optimism over tighter supplies, amid stricter US sanctions against Russia, was offset by caution before President-elect Donald Trump’s inauguration.
At 07:15 ET (12:15 GMT), expiring in March dropped 0.2% to $80.61 a barrel, while fell 0.1% to $77.31 a barrel.
Crude prices retreated slightly after recording four weeks of strong gains, as traders awaited news from Washington, with volumes limited by the US holiday.
Trump inauguration in focus for tariffs, energy cues
Markets were now focused squarely on Trump’s inauguration later on Monday, with the President-elect having promised increased trade tariffs on top oil importer China.
Trump also reiterated plans to increase US energy production during a Sunday rally, promising to lift regulations on the domestic energy sector.
Higher US production- which already stood close to record highs of over 13 million barrels per day in 2024- could potentially offset the impact of recent sanctions against Russia by keeping global crude supplies underpinned.
Trump has also vowed to dole out expansionary policies during his term- a trend that could underpin demand in the world’s biggest oil importer. US oil demand was a mixed bag in recent months. While cold weather did spur increased demand for heating fuels, it disrupted travel across large swathes of the country during the travel-heavy year-end holidays.
“There is a fair amount of uncertainty across markets coming into this week given the inauguration of President Trump and the raft of executive orders he reportedly is planning to sign. This combined with it being a US holiday today, means that some market participants may have decided to take some risk off the table,” analysts at ING said, in a note.
Oil markets weigh demand, supply outlook
Traders were speculating over a somewhat mixed outlook for oil supply and demand. While recent US sanctions on Russia could limit global supplies, this could be offset by demand remaining soft, especially if Trump imposes steep trade duties on China.
China is the world’s biggest oil importer, and has seen a steady decline in its appetite for crude amid persistent economic weakness.
“Output data from China on Friday shows that refineries increased the amount of they processed by 1.3% year-on-year in December,” said ING. “However, for full-year 2024, refinery activity still fell by 3.6% YoY, reflecting weaker domestic demand. Output and trade numbers suggest that apparent oil demand in December came in at a little more than 13.9m b/d, down from 14m b/d the previous month, but up 0.6% YoY.”
The People’s Bank of China kept its benchmark loan prime rate unchanged, as widely expected, on Monday.
Beijing is expected to ramp up its stimulus measures in the face of trade headwinds under Trump. Recent data also showed China’s economy improved after Beijing doled out its most aggressive round of stimulus measures in late-2024.
Recent gains in oil have also been curtailed by easing tensions in the Middle East, as Hamas and Israel exchanged hostages and prisoners over the weekend under a recently signed ceasefire, which also saw traders attach a smaller risk premium to oil.
(Ambar Warrick contributed to this article.)
By Arunima Kumar
(Reuters) -Oil prices were steady on Monday as traders awaited U.S. President-elect Donald Trump’s inauguration in the hope of some clarity on his policy agenda, including plans to end the Russia-Ukraine war.
futures dropped 37 cents, or 0.46%, to $80.42 a barrel by 1004 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 24 cents, or 0.31%, at $77.64.
The more active U.S. WTI crude March contract fell 36 cents to $77.03.
The focus is what executive orders Donald Trump will sign over the next 24 hours, said UBS analyst Giovanni Staunovo.
Charalampos Pissouros at broker XM, meanwhile, said that oil prices were trading a little lower on expectations that Trump will relax energy-related sanctions against Russia in exchange for an end to the war in Ukraine
Trump, who will be inaugurated later on Monday, is widely expected to make a flurry of policy announcements in the first hours of his second term, including an end to a moratorium on U.S. liquefied (LNG) export licences as part of a wider strategy to strengthen the economy.
The Brent and WTI benchmarks advanced more than 1% last week for a fourth consecutive weekly gain after the Biden administration sanctioned more than 100 tankers and two Russian oil producers.
That led to a scramble by top buyers China and India for prompt oil cargoes and a rush for ship supply as dealers of Russian and Iranian oil sought unsanctioned tankers for oil shipment.
While the new sanctions could cut supply from Russia by nearly 1 million barrels per day (bpd), recent price gains could be short lived depending on Trump’s actions, ANZ analysts said in a client note.
Trump has promised to help to end the Russia-Ukraine war quickly, which could involve relaxing some curbs to enable an accord, they said.
Easing tension in the Middle East also kept a lid on oil prices. Hamas and Israel exchanged hostages and prisoners on Sunday that marked the first day of a ceasefire after 15 months of war.
(Reuters) – Goldman Sachs on Monday said the market is pricing in odds of about 50% that there will be a 10% U.S. tariff on the metal by the end of the first quarter of this year.
Analysts at the U.S. investment bank said in a client note that the estimate is similar to their own 50% subjective probability of a 10% effective tariff on copper by year-end.
Three-month copper on the London Metal Exchange eased 0.3% to $9,167 a metric ton as at 0706 GMT after reaching a one-month peak last week. [MET/L]
President-elect Donald Trump returns to the White House later in the global day with an inauguration speech which traders will parse for policies to be enacted on day one. Trump has talked of tariffs of as much as 10% on global imports as well as 60% on Chinese goods and a 25% import surcharge on Canadian and Mexican products.
Goldman also noted that the oil market is pricing in a nearly 40% chance of a 25% U.S. tariff on Canadian goods including oil, versus the bank’s 15% subjective probability of a 25% effective tariff by the end of the year.
futures traded around $80.69 a barrel, while the more active U.S. West Texas Intermediate crude April contract was steady at $77.36. [O/R]
The investment bank assigned a 10% chance to a 10% effective tariff on gold being introduced within the next 12 months. It said bullion’s status as a financial asset makes it likely to be exempt from broad-based tariffs.
prices were up 0.3% at $2,708.77 per ounce while U.S. were little changed at $2,749.70. [GOL/]
The amount of gold stocks in COMEX-approved warehouses has jumped by one-third in the past six weeks as market players sought deliveries to hedge against the possibility of tariffs.
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