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A Tanker’s Giant U-Turn Reveals Strains in the Market for Russian Oil

A tanker loaded with one million barrels of Russian oil set sail from Murmansk this month, headed for Philadelphia. Then, in the middle of the Atlantic, it did an abrupt U-turn.

The ship, Beijing Spirit, had apparently lost the buyer for its oil. It removed “Philadelphia” as its listed destination, according to to the global maritime data provider MarineTraffic, and listed its new destination as “For Orders,” which indicates that the oil on board is for sale. The tanker then veered back toward Europe before spending several days bouncing round the Mediterranean, “presumably hoping to offload in more ‘friendly’ territory,” said John van Schaik, an oil-industry expert at the energy information company Energy Intelligence.

The meandering journey offers a glimpse into the tumult that has roiled the trade in oil, Russia’s most lucrative export, as the United States, Canada, Britain and Australia move to ban imports of Russian oil because of Russia’s invasion of Ukraine.

Overall, more than 20 tankers that have departed from Russian ports since the invasion — together carrying almost 8.5 million barrels of oil — now list their status as “For Orders” or “Drifting,” which indicates a lack of destination, according to the Russian Tanker Tracking Group, an initiative led by the Ukraine government to observe Russian oil sales. Other tankers now list final destinations like “ZZZ.”

Mr. van Schaik said it was uncommon to see so many tankers sailing under “for orders” status, and it likely had to do with the U.S. ban on Russian imports combined with self-sanctioning among oil companies. (Tankers sometimes do change destinations or are turned back if there is a mishap at the accepting refinery, for example.)

It’s not always possible to know where the oil will end up, he said, but traders could quietly sell it to refiners that cared less about their reputation than about price. “Once you put the crude somewhere in a tank on land, it is anonymous,” Mr. van Schail said. “You blend it with some other crude, load it on another tanker and sell it as European Sour Blend and nobody knows its origin was Russia.”

At the same time, at least seven tankers are still sailing toward the United States to offload their shipments before the U.S. ban on Russian oil takes full effect on April 21.

The United States imports only a small fraction of its oil from Russia, but nevertheless gasoline prices in America have been soaring in part because of the uncertainty over global supplies caused by the Ukraine invasion. On Thursday, President Biden, under pressure to bring down high American gasoline prices, said that the United States would release up to 180 million barrels of oil from its emergency reserves, a release at an unprecedented scale.

But in fact, Russia — the world’s third largest oil producer behind the United States and Saudi Arabia — is still exporting plenty of oil. Despite the global condemnation of Russia’s attack on Ukraine, Russian exports of oil and oil-derived products have yet to show a significant decline, according to data from Kpler, the commodity data and analysis firm.

Some countries, like India, Singapore and Turkey, have sharply increased their receipts of Russian oil in the weeks since the invasion, according to a separate tally by a Ukraine-led effort to investigate the companies and countries that continue to buy and sell Russian oil and gas. And the European Union has been unable to agree on an oil embargo among concerns that such a move would push economies in to recession, though Germany has said it intends to phase out Russian oil imports by the end of the year.

A tanker carrying Russian liquid natural gas docked near Saint-Nazaire, France, last month.Credit…Loic Venance/Agence France-Presse — Getty Images

Oleg Ustenko, economic adviser to Ukrainian president Volodymyr Zelensky, said in an interview from Kyiv that the oil trade means Russia is continuing to earn foreign currency to fund its war against Ukraine. Oil and gas revenues made up almost half of Russia’s federal budget in 2021.

“Whoever is buying this oil is financing war crimes,” he said. “We’re tracking every ship loaded with Russian oil.”

The big question is what happens next.

Last month, the International Energy Agency projected that Russian oil exports would fall significantly by April as sanctions take hold and more buyers shun exports. That shortfall could reach 3 million barrels a day, and could trigger a global oil supply shock, the energy agency said.

But Russia is defying those expectations. A port loading schedule obtained by Energy Intelligence shows that major Russian ports plan, at least on paper, to export almost 2.9 million barrels of oil a day in April, up significantly from both the previous month and from the same period last year.

Much of that demand is expected to come from Asia. India’s purchases of Russian oil, in particular, has jumped more than 700 percent in the five weeks since the start of the war in Ukraine compared to the previous five weeks, according to data from the Russian Tanker Tracking Group.

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As shipments to Asia have risen, Europe has shown a desire to cut purchases of Russian crude, said Reid L’Anson, senior commodity economist at Kpler, said in an email.

Tracking the drifting oil tankers at sea was important to start figuring out the new picture for Russian oil exports, he said. While it wasn’t necessarily out of the ordinary to have some tankers with unknown destinations, “given the situation in Russia, tracking these flows will be critical,” he said. “I’m going to be very interested to see just how much Asia fills the gap left by European buying,” he added.

Part of the West’s shift away from Russian oil has come on the heels of growing public pressure.

When the Minerva Virgo, a 50,000-ton Croatia-flagged tanker carrying Russian petrochemicals, docked in New York last week, the environmental group Greenpeace staged a protest in the harbor, with activists in rubber boats holding up signs that read “Oil Fuels War.”

(Several days later, a smaller tanker carrying Russian chemicals also headed for New York, the Vinjerac, changed its destination to “Drifting” a short distance from the shore and has not docked.)

In the United Kingdom, dockworkers at the Birkenhead Docks in northwest England earlier this month refused to unload a German-flagged tanker. Workers would “under no circumstances unload any Russian oil,” a local union leader told Sky News. The United Kingdom has banned Russian tankers from British ports but the order doesn’t apply to vessels from other countries carrying Russian oil.

In response to the invasion, major oil companies have said they are stepping away from their investments in Russia. Companies like BP, Shell, TotalEnergies and Exxon Mobil have all said they would not sign new oil contracts with Russia.

“Efforts to track the flow of these fossil fuels and expose the companies who have been profiteering through conflict and climate breakdown have shown that they are receptive to public pressure,” said Mike Davis, the chief executive of Global Witness, an environmental advocacy group that is working with Ukraine to track tankers continuing to carry Russian oil.

The ship that made a U-turn in the Atlantic, the Beijing Spirit, was chartered by Bermuda-based tanker company Teekay Corporation, and was carrying crude from Lukoil, Russia’s second-largest energy company after state-controlled Gazprom. Lukoil, which is private, has more than 200 franchises in the United States, including in the Philadelphia area.

Early Friday morning, the tracking data showed the Beijing Spirit docking in Santa Panagia, an oil terminal on the eastern coast of Sicily, Italy. It was not immediately clear whether its cargo of oil had been sold or offloaded yet, but it was no longer signaling for orders. Teekay said the tanker was loaded before the U.S. ban and was not in breach of any sanctions laws. Lukoil did not respond to a request for comment.

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