The Daily View: Close and yet so far

DONALD Trump may believe “we are closer now than we have been” to a peace plan for Ukraine, but Vladimir Putin was showing no sign of any compromise on Friday as he snarled his way through a four and a half hour phone-in session.

For now, the ever-optimistic oil market seems to favour Trump’s optimism over Putin’s recalcitrance as the likely outcome. Oil prices are at their lowest in almost five years, raising the spectre of more crude on an oversupplied market.

Even the potential unwinding of logistical distortions created by sanctions on Russian exports is sufficient to set end of year scenario planners’ hearts racing, but where does that leave shipping?

Well, firstly it remains highly unlikely that Europe will return to Russian crude rapidly, regardless of what can or cannot be achieved in time for Christmas. It will be politically unpalatable to do so.

Right now, the Brussels bureaucrats are setting about their 20th set of anti-Russian sanctions and the mood music inside G7 chats right now suggest replacing the price cap with an outright denial of maritime service to all Russian trade is the next step.

The fourth anniversary of Russia’s invasion is now widely seen as the deadline to make a decisive move, one way or the other, and there are significant moves afoot inside the EU to strike in the New Year. Whether the US joins in or not is going to be the big swing factor on what happens next.

Right now though, there are too many “what if” scenarios to calculate with any certainty what the impact on markets would be either way.

As things stand, the war is creating incremental demand for more than 110 aframaxes / LR2s, 75 suezmaxes and culling demand for close to 50 VLCCs, according to one calculation we saw last week.

Guessing what combination of pipeline or seaborne trade may be allowed back in under various scenarios is unlikely to be a popular parlour game around the festive dinner tables this Christmas, but some will go to any lengths to avoid conversation with family.

As discussed in previous Teatimes, lifting sanctions would likely be broadly neutral to supply.

Reintegration of the younger, sub-20-year-old fleet and idled vessels, coupled with increased trading efficiency of Russian exports, will likely offset the upsides from the exit of the “ageing (over 20-year-old) and trading” fleet.

As the Oil Brokerage wonks have suggested, the suezmax fleet will shrink by almost 30 vessels; gains, however, will be almost entirely offset by Russian trade becoming more efficient and requiring fewer vessels once the price cap is lifted.

For now, all this remains entirely hypothetical and dependent on what Trump and Putin decide over the coming days and weeks.

For a more detailed look at why Trump looks set to enter 2026 as the most influential figure in shipping, we refer you back to our Top 100.

Richard Meade
Editor-in-chief, Lloyd’s List

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