10 million barrels of Russian oil stuck at sea

Reuters reported that 14 Sokol oil tankers (Russia) are still drifting at sea and have not been delivered to customers due to payment problems.

Reuters sources said 14 ships carrying 10 million barrels of Russian Sokol crude oil have been stuck off the coast of South Korea for weeks, with the oil still unsold due to US sanctions and payment problems.

In late December 2023, Reuters reported that the delivery of Sokol oil to Indian state-owned oil company Indian Oil Corp was being delayed due to payment issues. Indian state-owned refiners agreed to pay for Russian oil in UAE dirhams.

However, the IOC payment was delayed because the company operating the Sakhalin-1 project was unable to open a bank account in the UAE to receive the money, Reuters sources said. Sakhalin-1 is currently the supplier of Sokol oil to IOC.

This has forced Indian refiners to draw from storage and buy more from the Middle East. IOC sources also said the company does not expect to receive cargoes soon.

A Russian-flagged oil tanker at the port of Marmara Ereglisi (Turkey) in January 2022. Photo: Reuters

The amount of Sokol oil floating at sea is equivalent to 1.3 million tons of oil, equal to one month's output of Sakhalin-1. This was once a leading cooperation project between Russian enterprises and American oil giant Exxon Mobil. However, Exxon withdrew from Russia after the country launched a military campaign in Ukraine in 2022. Production therefore fell to almost zero and has not been able to recover to this day.

As of January 26, 14 Sokol tankers were stuck around the port of Yosu (South Korea), including 11 Aframax (medium-sized oil tankers) and three VLCC (very large crude carriers), according to data firms LSEG, Kpler and traders.

Reuters sources said three VLCCs, which currently hold 3.2 million barrels of oil, are acting as floating storage for Sokol. The vessels had previously loaded oil from several Aframax vessels. Transferring oil from smaller vessels to larger vessels could save on shipping costs.

With the remaining 11 Aframax vessels, the Sokol oil will be loaded from November 2023 to January 2024.

Analysts say the difficulty in selling Sokol is one of the biggest challenges Moscow has faced since the imposition of Western sanctions. It is also one of the most serious disruptions to Russian oil exports in the past two years. Sokol is one of Russia's top three oil grades, along with Urals and ESPO.

Washington says it wants sanctions to cut off Russia’s revenue and stop it from funding the war in Ukraine. But the West also doesn’t want to disrupt the flow of Russian energy around the world. Last year, the US imposed sanctions on several ships and companies involved in transporting Russian Sokol oil.

Ha Thu (according to Reuters)

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