FIS Tanker Market Overview: Russian dirty product exports drop to 5-year low

Russian fuel oil and residual fuels exports have slumped to multi-year lows due to its invasion of Ukraine that resulted in condemnation from the global community.

According to IHS Markit Commodities at Sea Service, Russian fuel oil exports averaged 596,000 bpd in March, down 39% month-on-month from February, while its VGO shipments had been reduced by 50% to 163,000 bpd.

These exports volumes were the lowest since 2017, as the Russian refiners have started to cut back on refinery throughput that resulted in the shortage of diesel in the EU.

In fact, the diesel shortage already occurred before the Russian invasion, with European diesel fuel stocks were lowered by 8% yearly to 35 million bbls and under the five-year average for this time of the year, according to Reuters.

Despite the recent shunning of Russian energy exports, there was still around eleven March loading cargoes of fuel oil in transit to destinations within Europe, with seven to the Mediterranean and four cargoes to Northwest Europe, based on the data from IHS Markit Commodities at Sea Service.

Similarly, Russian fuel oil cargoes had fallen drastically to the US market with drop of 60% to 64,000 bpd in March with reportedly only four cargoes going to the US Gulf Coast, in contrast with 13 cargoes in February.

In the meantime, there was lots of demand coming from the Asian market with a total of seven VGO cargoes heard for APAC region, like three cargoes for Northeast Asia, then two cargoes each for India and Southeast Asia.

Tanker rates continued to rally, amid market fear of wider conflict expanding beyond the Ukraine and possible trade sanctions on Russian gas/crude exports.

The rates of VLCCs had improved gradually, especially in the Middle East Gulf, despite little fresh demand negotiated last week, according to IHS Markit Commodities at Sea.

However, VLCC shipowners still incurred some loss at negative $700 per day on the TCE, while there was little demand for large vessels in the Atlantic basin.

Smaller vessels like the Suezmax continued to thrive, as European countries tried to divert their supplies from Russia to either end or diversify their energy dependence from the belligerent country.

Meanwhile, shipowners refuse to take their vessels to the Black Sea for fear of being attacked, though the passage at the Turkish straits remained open for all ships, including vessels carrying the Russian flag.

So far, the tanker rates may benefit from the conflict in the short term, but in the long term, escalating conflicts might lead to global oil flow disruptions and shipping operations as Russian and Ukrainian seafarers accounted nearly 15% of the world shipping workforce.

Technical view of the tanker market (TD3C):

April Futures – Upside moves in the futures failed to test the lowest of our Fibonacci resistance levels. The futures has found resistance between the 8-21 period EMA’s, resulting in the futures moving lower once again.

Upside moves above USD 8.2700 will target the Fibonacci resistance zone between USD 8.6286 – USD 9.4601. However, the futures remain vulnerable to further tests to the downside below USD 9.4601.

Above this level price will target the USD 10.4770 high. Downside moves below USD 7.4860 will target the USD 6.9250 low.

The RSI is below its moving average and has just failed at the 50 level, suggesting we remain vulnerable to further tests to the downside at this point.

Written by Titus Zheng Shujian and Edward Hutton, Edited by Chris Hudson (https://freightinvestorservices.com/fis-live/).