A growing number of Western-insured oil tankers carrying Russian crude helped lift regional shipping rates in July, although the market's strength may be short-lived as higher oil prices and geopolitical tensions weigh on demand, Kpler analyst Panagiotis Krontiras said in a Thursday note.
Western-insured tankers increased their share of shipments from western Russian ports last month, while Russian crude exports also rose, creating stronger demand for Aframax tankers, a medium-sized class of oil tanker commonly used for regional crude shipments.
According to Krontiras, Western-insured vessels accounted for 48% of western Russian crude exports in July, excluding Kazakhstan's Caspian Pipeline Consortium blend.
The share carried specifically by Aframax tankers climbed to 40%, recovering from a low of 18% in December after Western sanctions tightened restrictions on Russian oil exports.
At the same time, Russia exported more crude as Ukrainian drone attacks on Russian refineries reduced domestic processing, allowing more oil to be shipped overseas.
Western-insured tankers transported about 615,000 barrels per day of Russian crude in July, equivalent to the employment of around 26 Aframax vessels.
The increase in tanker demand helped push up freight rates across the North East Atlantic. Additional support came from higher crude exports from Libya and Egypt and increased cargoes from the Mediterranean, Kpler said.
However, the rally has already begun to lose steam. Freight rates on a key regional route fell sharply in early August from late-July highs.
Higher global oil prices have also pushed Russia's Urals crude above the G7 price cap, making it more difficult for Western-insured vessels to participate in Russian trades under sanctions.
Kpler said future freight rates will depend on developments including the war in Ukraine, tensions in the Red Sea, oil prices and the availability of tankers. It added that an oversupply of Aframax vessels in the Atlantic market is likely to limit any sustained rise in shipping rates.