Russia’s shadow fleet freight rates fracture on Black Sea premiums

In late September and early October, the economics of Black Sea tanker operations improved significantly, driven by increased attacks on commercial ships, interruptions to Russian energy supplies, and heightened scrutiny of vessels linked to Russia. This contrasted with the declining performance of Baltic routes, where Aframax spreads continued to fall below their benchmarks.

The growing split in Russian seaborne trade is evident, with Black Sea vessels fetching higher compensation due to heightened security, insurance, and voyage-execution risks, while Baltic routes remain underperforming due to operational and commercial constraints tied to Russia-linked tonnage. The United Kingdom expanded its sanctions list on October 8 to include 12 tankers and Russian oil companies, following the Joint War Committee's decision to list the Black Sea as a Listed Area, thereby increasing war-risk insurance considerations.

Despite sanctions and attacks, Russian oil continues to flow globally, but the cost and complexity of movement have shifted, with over 1,600 vessels involved in Russian trade accounting for 73% of the shadow fleet by the end of August. This disparity in tonnage and market acceptance underscores the widening gap between Russian seaborne trade activities and those accepted by mainstream charterers, insurers, banks, and terminals.

The latest pricing reflects this divergence, with Black Sea Suezmaxes commanding the strongest relative returns due to elevated security and execution risks, while Baltic Aframax rates remain deeply discounted against global benchmarks. The deterioration in security conditions has made Black Sea shipments riskier to execute, while the widening Suezmax premium reflects the need for greater compensation.

Meanwhile, Baltic Aframax rates lag behind the benchmark, indicating that the relevant index for these routes has strengthened more rapidly than the Russian-linked routes. Despite this, Baltic TCE (Tankers Charter Earnots) earnings have remained below the Global Aframax Index since early September. Russian seaborne crude exports rose to 4.09 million barrels per day in September, up from 3.82 million b/d in August, with non-G7 tankers contributing 2.89 million b/d.

Meanwhile, diesel and gasoil exports from all Russian ports fell to zero in the week to September 24, with a monthly low of 479,000 mt recorded. The Black Sea-Mediterranean Medium Range spread widened to $24.56/mt, while the Baltic-Mediterranean spread narrowed to minus $4.82/mt. Earnings for Novorossiysk-Vadinar on the Black Sea route increased to $879,766/day, while Ust Luga-Sikka in the Baltic route saw earnings rise to $227,957/day.

The divergence between the Black Sea and Baltic shadow fleets is expected to continue, with Black Sea rates remaining vulnerable to security incidents, sanctions enforcement, and vessel-acceptance constraints. Baltic economics, on the other hand, will hinge more on Russian cargo volumes, compliant tonnage availability, and the performance of global tanker benchmarks.

Easing regional risks or improvements in vessel access could narrow the spreads, but additional sanctions or further disruptions to Russian trade would likely deepen the segmentation.