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September 30, 2023

Traffic jam in sea: Ship carrying oil to India gets stuck

Following a move by Turkey to demand proof of their proper insurance, oil ships carrying millions of barrels of Kazakh crude are being barred from leaving the Black Sea to reach international markets.

The Ankara government demands that the ships have a letter from their insurance confirming coverage while in Turkish waters, but this hasn’t happened yet. The action is in response to EU and UK restrictions, which only permit insurance of Russian crude-carrying boats if the oil was purchased at or below $60 per barrel.

As a result, at least 20 vessels carrying 18 million barrels of crude oil have been waiting to cross the Bosphorus and Dardanelles shipping straits for several days. A local port agent reported that all but one of the vessels had supplies from Kazakhstan on board and are awaiting confirmation of their insurance status.
On Monday, insurance companies said the letters Turkey is requesting could not and should not be published at this time. These risks included collisions and spills. Turkish officials were under pressure from the US and UK governments to change their strategy, and the insurers might finally give in.

According to a G-7 cap on Russian oil pricing announced last week, European companies can only insure tankers carrying Russian crude if the cargoes were purchased at or less $60 per barrel. The traditional method of verifying — on the websites of insurers — is no longer sufficient for Turkish authorities in the absence of that documentation.

The waiting tankers are traveling all over the world, from Panama in the west to South Korea and India in the east. The majority, however, are bound for Europe, which forbids the importation of practically all Russian crude by sea but permits the importation of Kazakh-grade crude oil from a terminal on Russia’s Black Sea coast. Nineteen of the waiting tankers are carrying cargoes of Kazakhstan’s CPC crude. The other holds about 1 million barrels of Russian Urals destined for India, port agent reports and vessel tracking data monitored by Bloomberg show.

In practice, Kazakh oil shouldn’t be subject to sanctions, but the fact the ships left from a Russian port may be contributing to the anxiety in Ankara about confirming their insurance status. Equally, insurers might balk at the precedent of writing letters for cargo that aren’t subject to sanctions.

Since Wednesday, a single Russian crude tanker has been waiting to pass and has been anchored in the Sea of Marmara just north of the Dardanelles.

With only three cargoes loaded in the week leading up to December 2, shipments of Urals and Siberian Light crudes from the port of Novorossiysk have been operating at low levels already. It is therefore difficult to say whether Turkey’s position will also hinder Russian flows or only Kazakhstan’s.

According to the Baltic Exchange in London, earnings for ships traveling from the Black Sea to the Mediterranean increased 7% on Tuesday to $153,000 per day.

Since Russian troops invaded Ukraine in February, buyers of Kazakhstani crude have encountered a number of challenges. The export terminal has been plagued since March by storm damage, the discovery of an unexploded World War 2 sea mine, the threat of a court-imposed 90-day port closure, and leaks in buoyancy tanks at two of the three loading buoys.

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