Turkish Straits tanker delays jump to 12-month high after G7 price cap

Transit times for oil tankers to cross the Turkish Straits from the Black Sea to the Mediterranean have jumped to the highest in a year amid a spat over recent Turkish demands for proof of insurance cover ahead of the G7 price cap on Russian crude.

Southbound tanker delays to transit the Bosporus and Dardanelles, at the north and south of the Turkish Straits respectively, rose to 10 days on Dec. 7, up from three days at the start of the month and the highest since Dec 3, 2021, according to assessments by Platts, part of S&P Global Commodity Insights.

Currently, 13 laden crude tankers are waiting to pass through the Turkish Straits, compared to around eight in early December and less than five throughout most of the second half of November, according to tanker tracking data from S&P Global Commodities at Sea (CAS).

A further two ships carrying refined products and fuel oil are also waiting to transit. All 13 crude tankers are carrying CPC Blend crude loaded at the Russian port of Novorossiisk, according to CAS data. Around 90% of the light medium-sweet CPC Blend exports are normally of Kazakh origin and therefore not subject to the G7's price cap on Russian crude.

Although higher than normal delays of one to two days in summer, backlogs on the key waterway routinely jump in the winter as a result of reduced daylight hours, strong winds, fog, rain, and snow. Southbound transit delays hit 12 days, for example, in the first week of December last year, Platts data shows.

But the tanker delays have escalated after Turkey issued a notice dated Nov. 16 requiring all ships transiting or entering Turkish waters from Dec. 1 to provide letters of confirmation attesting that insurance cover will remain in place under any circumstances throughout the duration of the transit or while the ship is in a Turkish port or waters. The move came ahead of the G7's price cap on Russian oil shipments which prohibits the transport and related insurance services of Russian oil when it is traded above the cap. The price cap on Russian crude of $60/b came into force on Dec. 5.

The International Group of P&I Clubs, which represents 13 mutual insurers providing cover for 90% of the global shipping industry, said on Dec. 5 that the Turkish requirements "go well beyond" the information contained in a normal confirmation of entry letter and advised its members not to issue a new cover letter to ship owners and charterers.

"Issuing a confirmatory letter under these circumstances would expose the Club to a breach of sanctions under EU, UK and US law and as such the Clubs cannot comply with the Turkish Authority's request," the P&I Clubs said.

Tanker rates

The P&I Clubs said they had sought to resolve the issue through talks with Turkish authorities that were expected to take place on Dec. 5.

In November, the majority of the 1.87 million b/d of crude loaded for export in the Black Sea was Kazakh-origin CPC Blend but some 350,000 b/d of Russian-origin crude was also shipped from Novorossiisk, according to CAS.

In contrast to the delays for CPC Blend, however, vessels carrying Urals crude and backed by Russian insurance have been able to navigate the Turkish Straits much more easily, according to sources.

This is likely because non-western insurers anticipated the additional requests Turkish authorities have made for proof of insurance once sanctions came into force, market participants said.

"With Russian P&I it's very easy to go through... I've already seen the last few Russian crude vessels go straight through already," said one trader.

The growing tanker backlog to transit the Turkish Straits comes amid rising tanker rates to carry crude from the Black Sea to the Mediterranean and higher demurrage costs for delayed vessels.

Platts assessed rates for the Black Sea to Mediterranean route for 135,000mt crude tankers at $27.11/mt on Dec. 6, down from a recent jump to $31.74/mt on Nov. 22 but up from $21.23/mt before Turkey announced the new insurance requirements.

"High uncertainty around regulations creates disruptions to the market which tend to benefit the freight rate markets," analysts at S&P Global said in a recent note. "Activity seems to be happening under the radar with seemingly no fixtures reported out of Russia as of late."

The value of Russia's main Urals export-grade crude has been trading below the G7's $60/b price cap since Nov. 18 and was last assessed by Platts at $45.98/b on Dec. 6, a $34.55/b discount to Dated Brent.