The situation in the Red Sea, particularly the Houthi attacks on commercial shipping, has significantly increased demand for tankers, as they navigate around the Cape of Good Hope. The frequency of these attacks has been rising steadily. Despite this, we still observe chartering patterns opting for the Red Sea route. Year-on-year transit figures show a decline of approximately 53% for crude tankers and about 48% for long-range product tankers, indicating relative stability. Nevertheless, geopolitics are once again reshaping oil flows, echoing the impact seen after sanctions were imposed on Russia’s oil and shipping sectors.
Are sanctions on Russian oil having any greater impact this year?
About ten days ago, the UK government imposed direct sanctions on four vessels for breaching the G7 price cap. This mirrors US sanctions on 18 tankers linked to Hennessy Holdings, effectively removing them from the market. It marks a significant step in sanction enforcement and compliance, signaling closer coordination among Europe, the UK, and the US. It appears to be the beginning of a broader pincer movement, with Scandinavian governments also scrutinizing daily transits through the Danish straits, particularly concerning Russian refined products. They are responding to what they view as blatant breaches of international shipping conventions, both technical and environmental. I anticipate more actions ahead, likely placing extreme pressure on the ‘dark fleet’ of tankers involved in shipping oil outside Western jurisdictions. This segment currently handles roughly half of all Russian oil exports from non-Western ports. And while the G7 price
cap hasn’t yet fully achieved its objectives, compliance measures implemented in the last six months have shown some effectiveness. Despite these efforts however, the flow of sanctioned oil continues, now constituting 17% of seaborne crude. The European, UK, and US regulators, wield considerable influence due to the dominance of the US dollar in global shipping and oil transactions. I foresee renewed efforts in the next few months aimed at tightening enforcement of the price cap and achieving tangible results.