Shadow Fleet Expands Amid Sanctions
The shadow fleet of oil tankers has grown significantly following a slew of Western sanctions on Russia over its war in Ukraine, according to Saad Rahim, chief economist at major trading house Trafigura. This expansion is playing a key role in keeping Russian crude flowing to buyers despite the sanctions, targeted at curbing Moscow’s oil revenues.
The shadow tanker fleet has grown more slowly this year, but it continues to expand as new vessels frequently replace those that are blacklisted. Rahim noted that the size of the shadow fleet has grown even larger due to the increasing number of sanctions and restrictions.
Impact of Tariffs
Rahim also discussed the impact of U.S. tariffs on the global economy and fuel demand. He stated that the tariffs so far have had a limited impact, as companies in the U.S. have been able to draw down pre-tariff inventory at prices they haven’t had to pass through to consumers yet.
The key story with tariffs is that we actually haven’t seen the impact yet on the demand side, Rahim said. He added that there hasn’t been enough time for the August 1 tariffs to really show up on the demand side. Producers are setting their capital expenditure budgets in the next few months in view of the $60 per barrel mark for oil prices, which is the breakeven level.
Oil Production and Rig Count
On supply, Rahim noted that the number of U.S. oil rigs has also declined, with production expected to stall at current levels. If you look at the number of rigs, we have gone down by about 25% right now, he said. There is a time lag for the lower rig count to affect production, and while you won’t see the drop yet because there is a six to eight months’ lag, I think you are going to see production start to stall at these levels and then potentially come down.
Reporting by Florence Tan and Jeslyn Lerh; Editing by Sonali Paul
Original Article: Oil shadow fleet grows on sanctions, Trafigura economist says — Reuters