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Russian Oil Sanctions Send Prices Of Old Tankers To New Records

Russian Oil Sanctions Send Prices Of Old Tankers To New Records

There has been a veritable cornucopia of "unintended consequences" in the…



Russian Oil Sanctions Send Prices Of Old Tankers To New Records

There has been a veritable cornucopia of "unintended consequences" in the event frenzy of 2022, and here is another.

Now that the European Union has banned all seaborne Russian crude imports from Dec. 5 (with a fuel import ban to follow in February) and also banned companies and individuals in the bloc from providing financing, brokerage, shipping and insurance services to ship Russian oil elsewhere if the crude was bought above a price cap of $60 a barrel (which Russian Urals crude is currently trading below), the market for old oil tankers is booming, amid self-defeating efforts by Western nations to curb trade in Russian crude.

Because while Europe happily purchases "banned" Russian oil and gas resold from India and China (at a huge markup), its actions have served as a gold mine for a creaky - literally - subsector of shipping, and as Western shipping and maritime services firms now steer clear of Russian oil to avoid falling foul of sanctions or harming their reputations, new companies have leapt into the void, and they're snapping up old tankers that might normally be scrapped.

As Reuters reports, ageing tankers have been sold in recent months by Greek and Norwegian owners for record prices to pop-up Middle Eastern and Asian buyers taking advantage of sky-high charter prices for vessels willing to ship Russian oil to India and China.And it is not some Chinese backwater sweatshop but rather reputable tanker management companies such as Fractal Shipping, run out of Swiss financial hub of Geneva, that are reaping the rewards of Europe's virtue signaling policies

In less than a year, Fractal has put together a fleet of 23 oil and fuel tankers bought recently by owners in Dubai. Most are taking Russian crude from Baltic and Black Sea ports to Asia, Refinitiv Eikon ship tracking showed.

Chief Executive Mathieu Philippe said he launched the idea for Fractal a year ago, betting that the global tanker fleet was getting stretched and that both the cost of vessels and freight rates would inevitably rise from pandemic lows. Or maybe he just read what Zoltan Pozsar correctly predicted in March about the coming surge in tanker prices and shipping rates as companies front ran the coming frenzy to evade Russian sanctions. Whatever the reason, by the middle of 2022, new ship owners, known as principals, started asking him to get into the Russian oil business.

"We were given a lot of tankers in August and September. Our principals wanted to come into the business for the Russian opportunity," the shipping industry veteran told Reuters.

Major Western oil companies typically stop using tankers when they are about 15 years old, and many would be scrapped. Fractal's fleet, meanwhile, consists entirely of older vessels ranging from 13 to 19 years, Fractal's website shows.

And with new entrants keen to get a slice of the Russian business, second-hand oil tanker prices have surged, especially for Aframax vessels that can carry up to 600,000 barrels, the standard size used for loading crude at Russia's Baltic ports.

The price tag for 20-year-old Aframaxes has jumped 86% from $11.8 million on Jan. 1 to $22 million now, according to valuation company VesselsValue.

So far this year, 148 Aframax sales have been reported, a 5% increase from the same period in 2021, VesselsValue said. Research by ship broker Clarksons showed that more tankers were sold in the first 11 months of 2022 than any full-year previously and sales in October set a new monthly record of 76.

However, there could be complications:  until Dec. 5, there were no Western sanctions on transporting Russian oil to Asian markets, so Fractal and other management companies had not breached any rules. To avoid potential pitfalls, though, Philippe said Fractal does not deal with any Russian-owned companies. That would also be a no-go for Western banks financing maritime trade, he said.

To prevent the new EU sanctions from halting millions of barrels per day of Russian crude exports and driving up global fuel costs, the Group of Seven (G7) rich nations has mitigated its impact by permitting exports below a cap of $60 a barrel. The aim of the plan is not so much to reduce Russia's export revenue but to keep oil supplies flowing, even if the plan is repackaged for public consumption as a noble attempt to crush Putin's primary revenue stream.

The agreement on the price cap means operations such as Fractal's can carry on shipping Russian crude without any issues, as long as the deals are below the cap. That said, the Kremlin has repeatedly said it will not sell oil below the new price cap while Russia's two biggest buyers, China and India, have not promised to abide by the limit.

Meanwhile, new ship owners willing to transport Russian oil are cashing in on the record arbitrage created by the Western virtue-signaling sanctions. "Ships earning $80,000 a day in the Mediterranean can make $130,000 a day if they carry Russian oil," one ship broker told Reuters.

Crude tanker rates have jumped to highs not seen since 2008, aside from a brief period in 2020 when oil firms scrambled for tankers to store fuel as demand crashed due to the pandemic.

Tanker owners can make more than $100,000 a day for some journeys, said Omar Nokta, analyst at investment bank Jefferies.

"While it remains to be seen how the price cap on Russian exports will ultimately play out, what is clear is that the tanker fleet is becoming stretched and travelling longer distances," he said, echoing again what Zoltan Pozsar predicted would happen 9 months ago.

And as Pozsar also predicted, more tankers are now being used for voyages taking weeks, shipping Russian oil from the Baltic and Black Sea to Asia, whereas Russian oil was mainly sold in Europe previously and the voyages only took a few days.

Adding to the upward price pressure, shipbuilding also stalled during the pandemic and deliveries of new oil tankers next year are set to be historically low, according to analysis from shipping brokers.

Reuters monitored 18 of Fractal's tankers using Refinitiv Eikon ship tracking data. Twelve have loaded oil at Russian ports in the last two months either for the first time, for the first time since the Ukraine war started, or at least for the first time in over a year, the data showed. Two have been calling regularly at Russian ports.

For instance, the Fractal-managed Charvi tanker loaded crude at Russia's Baltic port of Primorsk in the middle of September before sailing to discharge its cargo in Sikka, India.

The tanker formerly owned by Norway's Viken Shipping under the name Storviken had never previously called at a Russian port, Refinitiv Eikon data going back to 2010 showed.

Charvi tanker, formerly known as Storviken

Similarly, Daphne V another tanker previously owned by Viken Shipping and now managed by Fractal called at Primorsk on Nov. 11 for the first time since the Ukraine war started and is heading to the Suez Canal en route to Asia. The tanker was called Kronviken before it changed hands. Viken Shipping said it had not sold ships to Russian owners but declined to identify the buyers.

Ship broker Braemar estimated that about 120 of the 212 tankers sold to likely Russian buyers this year were looking at Russian crude oil trades, while there were virtually no sales last year to buyers involved in shipping Russian crude.

Adding to the confusion over the ban, the U.S. Treasury has provided only token guidance about how the cap will work, but questions remain over its enforcement. 

"The price cap is very confusing," Fractal's Philippe said. "We are definitely one of the companies that want to remain in the Russian trade. As businessmen we have to be opportunistic."

The biggest joke after all the oil price cap fanfare is that according to Reuters, buyers must provide documents such as invoices to shipping companies or insurers to show they stuck to the cap but it will be essentially down to self-monitoring, with no penalties for providers of shipping services if they operated in good faith. One can imaging how efficient self-monitoring will be when there are millions of dollars daily on the line for those who breach the rules.

To be sure, deals proven to be outside the price cap would effectively break sanctions, and other vessels that have at some point been involved in circumventing oil export sanctions on Venezuela and Iran may well play a part in that trade, analysts say.

Hilariously, one aim of the G7 price cap plan is to prevent this so-called 'dark fleet' getting bigger by allowing Russian oil exports to take place transparently without breaking sanctions. The reality is that said dark fleet will only get bigger.

This dark fleet, which accounts for about 10% of the world's oil tankers according to Trafigura and other shipping industry sources, helped Iran circumvent a U.S. embargo for the better part of a decade, and Venezuela since 2019, as Western nations collectively looked away knowing full well what was going on.

Which is why, smelling an uncollected fortune in the water, at least 21 tankers have switched to shipping Russian oil after previously being used for Iranian shipments, said Claire Jungman, chief of staff at U.S. advocacy group United Against Nuclear Iran (UANI), which monitors Iran-related tanker traffic through ship and satellite tracking. Of those vessels, at least have four changed ownership in recent months.

Ship broker Braemar also said that some of the vessels involved in shipping Iranian and Venezuelan oil were shifting to transporting Russian oil.

It estimated that the so-called shadow fleet shipping oil from those two countries and some of them also for Russia was made up of 107 Aframaxes, 65 larger Suezmaxes and 82 VLCCs (Very Large Crude Carriers).

"Instead of having one optimised fleet you now have two separate optimised fleets," said Christian M. Ingerslev, chief executive of Denmark's Maersk Tankers.

"If sanctions are continually adjusted, it becomes very difficult for the sanctions compliant companies to take the risk because they don't know what will happen tomorrow," he said.

Tyler Durden Tue, 12/06/2022 - 11:20

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Emerita kick-starts Nuevo Tintillo drill program in Spain

Emerita Resources Corp. (TSXV:EMO) has begun its diamond drill program at its wholly owned Nuevo Tintillo project.
The post Emerita kick-starts Nuevo…



Emerita Resources Corp. (TSXV:EMO) has begun its diamond drill program  at its wholly owned Nuevo Tintillo project The drill campaign will start with one rig that will be mobilized next week An initial 3,000 metre program has been approved with a potential expansion to an already designed program of 11,500 metres of diamond drilling depending on results Emerita Resources Corp. last traded at $0.34 per share

Emerita Resources Corp. (TSXV:EMO) has begun its diamond drill program  at its wholly owned Nuevo Tintillo project.

Construction of drill access roads and platforms at the Project are completed. The drill campaign will start with one rig that will be mobilized next week. The Toronto-based miner says permits for the program and agreements with local landowners are in place.

Source: Emerita Resources Corp.

An initial 3,000 metre program has been approved with a potential expansion to an already designed program of 11,500 metres of diamond drilling depending on results. 

The initial drill program at Nuevo Tintillo will focus on six targets that have been identified on the west side of the Project, nearest to the Rio Tinto mine. Targeting was based on a combination of airborne electromagnetic surveying, detailed and archived gravity data, detailed mapping, and a compilation of historical geology.

Plan view detail of gravity data previously shown, merged with TDEM conductivity data that has been filtered to show only very conductive zones (1km grid). Source: Emerita Resources Corp.

The team has continued to evaluate the potential along strike to the east, towards the center of the property, in addition to the drilling at Nuevo Tintillo.

Due to the hot and dry summer, the restrictions related to fire prevention in the area were extended to mid-October.

Oblique sectional view of surface geology at 1:5000 and TDEM section 724250E illustrating two of the drill targets. Source: Emerita Resources Corp.

Emerita was awarded the Nuevo Tintillo concessions in June 2021. The Nuevo Tintillo project is hosted in the Iberian Pyrite Belt. Nuevo Tintillo encompasses 145 square km. and is Emerita’s largest landholding in the belt. The concessions were previously held by several major companies during the 1980’s and 1990’s, most recently Boliden Apirsa (PINL:BDNNY).

Emerita Resources Corp. is a natural resource company engaged in the acquisition, exploration, and development of mineral properties in Europe, with a primary focus on exploring in Spain.

Emerita Resources Corp. last traded at $0.34 per share.

Join the discussion: Find out what everybody’s saying about this stock on the Emerita Resources Bullboard, and check out the rest of Stockhouse’s stock forums and message boards.

The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.

The post Emerita kick-starts Nuevo Tintillo drill program in Spain appeared first on The Market Herald Canada.

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GBP/USD – UK consumer activity cools in the run-up to the festive season

UK retail sales -0.9% in Setember (-0.3% expected) UK Gfk consumer confidence -30 in October (-20 expected) GBPUSD losing momentum near recent lows UK…



  • UK retail sales -0.9% in Setember (-0.3% expected)
  • UK Gfk consumer confidence -30 in October (-20 expected)
  • GBPUSD losing momentum near recent lows

UK consumers are reining in spending in the run-up to the festive season and the latest survey from Gfk suggests it’s not just the weather that’s driving it.

Retail sales fell 0.9% in September, far exceeding expectations of a 0.3% decline as unseasonably warm weather weighed on sales of Autumn clothing. While that’s not a new phenomenon, weather is often referenced in these reports, it also comes at a time when the cost of living pressures are being felt even though wages are now outpacing inflation.

Whether it is higher prices at the pump or supermarket, larger energy bills, or big increases in mortgages and rents, households are feeling the pressure and that’s not just being reflected in sales but surveys too.

The Gfk consumer confidence slipped back to -30 again and cost-of-living pressures were cited as a reason for that. While there is a view that decelerating inflation – which Governor Bailey indicated will fall sharply in October – could support consumer spending, I’m less convinced after such a long period of falling real wages and continued pressures from higher interest rates.

A double bottom forming?

The recovery earlier this month didn’t last long, with the price running into resistance around 1.2350, just shy of the 200/233-day simple moving average band.


Source – OANDA on Trading View

It’s now facing an interesting test of support as another rebound around these levels could potentially set up a double bottom following a substantial decline over the last few months.

The pair appears to be struggling to generate fresh momentum near the lows even as the dollar remains supported by higher US yields and the pound was briefly hit by the softer spending data. Another bounce may draw focus back to last weeks highs around 1.2337 which may represent the neckline of that double bottom.

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How the Israel-Hamas war could affect the world economy and worsen global trade tensions

History shows how conflicts can create uncertainty that can rattle financial markets. This could feed into consumer price inflation, keeping it higher…




Global geopolitical tensions often play a pivotal role in shaping people’s perceptions of economic growth. Research shows concern about such issues can cause people and businesses to become more cautious about spending and investing, which can ultimately lead to economic recession.

The recent escalation of the Israel-Palestine conflict is no different. Investors around the world are worried about the repercussions of this war – particularly in light of an already bleak picture for global economic growth.

Hamas’s October 7 attack on southern Israel is the latest chapter of a cycle of violence that has been going on in this region for decades and, sadly, seems to have no end in sight. While the reasons behind these events are complex, the conflict’s potential immediate and long-term economic ramifications are easier to grasp.

After all, if the Russia-Ukraine war has taught us one thing, it’s that we should be mindful of the intricate interdependencies that shape the global economic and geopolitical landscape.

Read more: Ukraine and the financial markets: the winners and losers so far

How conflicts can affect the economy

Internal and inter-state conflicts often have a significant effect on stock market indices, exchange rates, and commodity prices – sometimes even sending prices higher in the lead-up to hostilities. The longer-term economic impact is typically more complicated to assess, however. The lasting effects of even seemingly dramatic events on investor behaviour can be hard to predict.

Conflicts in the Middle East tend to lead to spikes in oil prices – think of the OPEC oil embargo of 1973-1974, the Iranian revolution of 1978-1979, the Iran-Iraq War initiated in 1980, and the first Persian Gulf War in 1990-91. Since the region accounts for nearly a third of global oil supply, any instability can create market uncertainty based on concerns about interruptions to global oil supply.

This uncertainty is reflected in the risk premium in oil markets. This is the price paid for oil traded ahead of time in the futures markets versus the real-time price of oil. It reflects the profits that speculators expect to receive from buying and selling oil during a time of conflict, as well as the hedging needs of businesses that produce and consume oil and their concerns about supply and demand.

And so, the effect of the latest Israel-Hamas conflict on global financial markets will depend on the involvement of other major regional powers. If the conflict remains between Israel and Hamas, the effect will probably be limited and arguably exclusive to countries with direct trade exposure to Israel or Palestine.

But if the conflict spreads to major oil-producing nations in the region such as Iran, the global economy could face severe repercussions as energy costs for businesses and households could spike if supply is interrupted.

Higher energy prices would hamper central banks’ efforts to tame inflation pressures in most advanced and emerging economies. If this leads to a “higher for longer” monetary policy that keeps interest rates elevated, it would push up the cost of borrowing and refinancing by governments, companies and people.

History can offer some insights into how the impact on the global economy could unfold under these different scenarios. For instance, the 50-day war between Israel and Hamas in 2014, which killed 2,200 people, mostly civilians, had no significant effect on the global economy or financial markets.

Yet, when Israel and Hezbollah clashed in Lebanon in 2006, oil prices surged globally due to fears of a broader conflict in the Middle East.

What to expect this time

Unfortunately, there is another factor to consider at the moment. The escalation of the Israel-Palestine conflict has happened alongside the realignment of various global alliances. This slow creep of “deglobalisation” can be seen in a shift in trade policies in recent years.

Countries such as the US and UK are relocating economic activity including sourcing or manufacturing products from different countries out of concern about relying on suppliers in potentially hostile regions, as well as the impact of imports from low-wage countries on struggling local labour markets

At the moment, these shifts can also be seen in the reactions to the Hamas attack on Israel. A two-state solution) to the Israel/Palestine conflict was initially laid out by the United Nations in 1947 and reaffirmed in 1974, with almost unanimous support around the world.

But there has been some nuance in the international reactions to the attack. With most western countries quickly voicing support for Israel’s right to defend itself, while countries like China and Russia called for a ceasefire without taking a stance on Hamas.

This suggests that the issue of Israel-Palestine could tie in with the broader trend towards the new geopolitical divisions that were already starting to emerge before Hamas’s attack.

A prolonged conflict between Israel and Palestine, especially with the involvement of major regional powers, could further accelerate this global realignment and have detrimental consequences for global economic growth.

Read more: China-US tensions: how global trade began splitting into two blocs

Gold bars on top of dollar bills and a printed chart.
Investors often invest in gold as a eamesBot/Shutterstock

Under these circumstances, investors are already bracing for increased financial volatility across the board – from stocks and government bonds to commodity markets. So-called safe-haven assets like gold are typically used as protection against overwhelming economic uncertainty. The price of gold has shot up following the latest escalation in the Israel-Palestine conflict.

Financial markets will continue to monitor the conflict between Israel and Hamas for signs of escalation. Anything that pushes oil prices up further will reignite fears of higher inflation.

Unfortunately, this is happening just as many countries were starting to see inflation slow again after two years of persistently high consumer prices.

Daniele Bianchi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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