Russia is competing with Iran and Venezuela to sell oil at a discount
As sanctions and international isolation begin to grip the Russian oil industry, it has begun to lower prices in order to attract new buyers to distant markets. But in doing so, according to business news firm Vortexa, Russia began to compete directly with Iran and Venezuela for a limited market in clandestine oil.
One of the main signs is the movement of overnight flying tankers from the sanctioned Iranian oil trade to the previously over-the-edge Russian oil export market. According to Vortexa, 11 tankers that previously carried Iranian crude have loaded Russian oil or petroleum products since April. At first, the majority were Aframaxes, but in recent weeks a number of VLCCs have joined the trend. In the first half of July, these ships accounted for around 250,000 bpd of Russian oil exports.
“As more and more companies forego shipping Russian crude/products, those familiar with the sanctioned crude trade will continue to use their tankers to help Russia export oil east of Suez,” predicted Armen Azizian, crude market analyst for Vortexa.
Meanwhile, AIS-dark STS transfers – a feature of sanctioned Iranian and Venezuelan oil exchanges – are a growing trend for Russian oil exports in the Atlantic.
Vortexa has identified 14 tankers carrying Russian oil that have been overnight in the Atlantic in recent weeks, including five that previously carried Iranian oil. More of this activity is expected soon, according to Vortexa, as more tankers with Iranian experience appear to be posting empty in the Atlantic awaiting STS transfers.
These signs of smuggling of oil support the view that Russia is selling barrels quietly and cheaply to buyers less susceptible to reputational risk. It also means that Russia is pursuing the same buyers who collect sanctioned shipments of Iranian and Venezuelan oil.
“It is very clear that Russia is competing with Iran and Venezuela for so far limited investment options in the Eastern Suez markets, essentially only China and India. China, in particular, seems to be hesitant so far to take huge volumes of Russian crude,” says Azizian. “Meanwhile, increasing inflows of sanctioned or near-sanctioned (Russian) oil into Asian markets are causing some Middle Eastern suppliers to struggle to place all of their medium to heavy sour barrels.”