How Russian oil bypasses the ‘narrow door’ to China in the midst of the embargo storm

Follow BloombergChinese traders are using creative ways to maintain the flow as more and more ship owners move away from Russian oil under the influence of sanctions.

Accordingly, small ships are used to transport oil from the Russian port of Kozmino to the waters off Yeosu in South Korea. Here, the oil barrels will be transferred to large supertankers for the next leg to China.

The number of shipowners and insurers willing to handle Russian crude is dwindling, shipping brokers say, creating a significant logistical challenge for producers and buyers as they have little supply. More shipping options.

In the past, this transportation process has never been applied to Russian ESPO crude oil. ESPOs are often loaded onto small tankers during their five-day direct voyage to China.

Although the new method increases transportation time and costs in the current context, ship owners and buyers still prefer to use small ships to transport oil out of Kozmino in a short time.

Traders willing to buy Russian crude will benefit from preferential discounts when the parties are avoiding trading with Moscow because of the conflict in Ukraine.

Follow Bloomberg, due to its close location and not many logistical obstacles, China will receive almost all of ESPO’s goods this May. This is the type of oil that used to be shipped to other countries like Korea and Japan.

Pandemic COVID-19 The outbreak in China reduced demand and limited long-distance crude oil imports, making the supply of super-large tankers abundant. This means that the method of transporting ESPO oil from small ships to large ships is easier to replicate when small ships can make short trips.

Small tankers suitable for transporting cargo out of Kozmino are becoming “expensive”, according to intermediaries.

According to ship tracking data, Yang Li Hu and Yang Mei Hu – two LR-2 op tankers owned by a Chinese shipbuilding company loaded ESPO oil between May 16-18 before their transfer. headed to Yeosu to deliver oil to the supertanker Yuan Qiu Hu.

Since this shipment, the ship Yang Li Hu received another order on May 23 and is on its way to Yeosu. Meanwhile, Yang Mei scheduled to pick up the next shipment on May 26.

While small-to-large vessel transfers are common for long-distance shipments of crude oil such as Russia’s Urals oil from the Baltic Sea to Asia, ESPO oil is almost never transported this way due to its short route. .

Bloomberg said shipowners such as Cosco Shipping and Russia’s Sovcomflot are processing orders to transport large amounts of Russian crude from ports such as Kozmino and Ust Luga in the Baltic Sea.

But there are also a number of other shipping lines such as Maersk that have cut off their dealings with Russia. The rest are listening to the situation to respond due to concerns about tougher regulations and a potential European Union oil ban.