Last year, Greece emerged as a new hub for Russian oil via ship-to-ship (STS) loadings shortly after the U.S. and Europe slapped heavy sanctions on Russian crude. At the height of the Russia-Greece trade, shipments of Russian fuel oil clocked in at nearly a million tonnes, several times the volumes before the sanctions.

But now Greek-operated tankers are cutting their volumes of Russian crude after the price of Urals surpassed the US$60/bbl price cap for the first time in July. According to Argus Media, Greek tanker operators, who control more than one-third of tankers which have been lifting Russian crude post-ban, cut volumes of Russian crude by 482,000 bbls in July, with current volumes good for 35% of all cargoes compared to 45% in June. With Russian crude now more costly, Chinese buyers are increasingly turning elsewhere which further disincentivizes Greek operators from remaining in the Russian trade due to the complications of remaining sanctions-compliant.

Consequently, Greek-operated tankers are discharging Russian crude and increasingly ballasting to the Middle East Gulf instead of ballasting back to load again in Russia. Suezmax tankers are the most affected with an average 40% of Greek-operated Suezmax tankers having ballasted back to the Middle East Gulf. Ballasting or de-ballasting is a process by which a ship takes in or discharges sea water when the ship is at the port or at sea. Ballasting is done to ensure trim, stability and structural integrity of the ship when it’s carrying no cargo. Suezmax tanker and Aframax tanker availability is at high levels, which has pushed Aframax tanker freight rates to lows last seen before the Russian invasion. Related: Standard Chartered: All-Time-High Demand Will Push Oil To $100

Little-Known Traders Dominate Trade In Russian Crude

Historically, giant commodity traders such as Switzerland's Vitol, Glencore, and Gunvor as well as Singapore’s Trafigura have dominated the global oil trade while smaller trading desks that lack the wherewithal and deep infrastructure networks of the giants usually feed on crumbs. The same case applied to the Russian market before Putin’s invasion of Ukraine, with Trafigura moving ~850,000 barrels of Russian crude per day at its peak. But the oil hegemony has now been severely disrupted, with Bloomberg reporting that six little-known companies based in Dubai and Hong Kong now dominate Russian oil trade with the traditional leaders no longer in the picture.

According to Bloomberg, Russian customs data shows that Nord Axis Ltd, Tejarinaft FZCO,QR Trading DMCC, Concept Oil Services Ltd, Bellatrix Energy Ltd and Coral Energy DMCC together handled about 1.4 million barrels a day of Russian crude oil. That’s more oil than what the commodity giants typically handled before the war in Ukraine, and enough to meet the entire needs of countries such as the UK and Italy.

Interestingly, it’s Nord Axis, a company that was incorporated just a year ago in Hong Kong, that emerged as the biggest buyer, moving 521,000 barrels of Russian crude per day. Nord Axis was virtually unknown in the oil market until it bought Trafigura’s stake in Rosneft’s flagship oil project Vostok Oil in July. Dubai-based Tejarinaft FZCO was the second largest buyer after it purchased 244,000 barrels a day from Rosneft while Dubai-based QR Trading DMCC was the third-largest buyer, moving 199,000 barrels a day from Surgutneftegas PJSC. Other top buyers were Hong Kong’s Concept Oil Services Ltd (152,000 b/d), Hong Kong-based Bellatrix Energy Ltd (151,000 b/d) and Dubai’s Coral Energy DMCC (121,000 b/d).

It’s not clear how these traders were able to finance the large flows of Russian oil, with Bloomberg estimating it was worth more $2 billion over the month of December.

Even more perplexing is the fact that Nord Axis, QR Trading DMCC and Bellatrix Energy Ltd were unknown entities before the west abandoned the Russian energy markets. Bloomberg has established that Bellatrix received loan facilities from Russian banks including Rosneft-owned Russian Regional Development Bank and Russian Agricultural Bank, though calls or emails to these traders, their banks and Russian oil producers have gone unanswered.

“Knowing who the big names are is an important step in understanding how oil markets are responding to the price cap and wider sanctions,” Steve Cicala, co-director of the Project on the Economic Analysis of Regulation at the National Bureau of Economic Research, has told Bloomberg.

Meanwhile, other experts have decried the opacity of Russian oil markets, “We’re coming to this with a lot of humility and we’re just asking that everyone else can adopt the same level of uncertainty. These are really opaque markets, the data’s not great on it. Let’s just acknowledge that from the outset when we’re making conclusions,” U.S. Assistant Treasury Secretary Ben Harris has told Bloomberg.

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By Alex Kimani for Oilprice.com

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