Russian oil cap in focus as prices plummet

The Russian oil price cap is expected to make headlines in the coming weeks as oil prices approach the moment where shipowners from across the world can make the decision whether to legitimately carry oil exports for Moscow. 

The crude oil price cap, which came into effect on 5 December 2022, was implemented by the EU, G7 and Australia, restricting the use of Western shipping services if prices for Russian oil exceed a certain price cap, currently set at $60 per barrel of crude oil. A similar cap for Russian products came into effect two months later.

Noting how the price of Urals, the main Russian crude, is approaching the $60 per barrel price cap, analysts at Poten & Partners, an American tanker brokerage, have mused how many Western owners will now engage in Russian trades.

“If this happens, this would be a double positive,” Poten suggested in its latest weekly report. First, Poten argued it would increase the utilisation of the mainstream tanker fleet, supporting the freight market. Secondly, Poten suggested the price cap crossing could marginalise the older tankers of the dark fleet, often with “opaque ownership, substandard maintenance, inexperienced crews and lacking proper insurance”. 

The latest Poten tanker market report noted how there are estimates today that suggest at least 70% of Russian oil is currently exported on tankers from the dark fleet.

“As a number of recent near misses has shown, the vessels in the dark fleet pose a high environmental risk,” Poten observed.