Will Avoiding Sanctions With Dark Oil Impact World Oil Prices?

The global shipping industry needs to work more closely with the governance framework of affected countries and ensure greater transparency and accountability for cargo movements, especially in light of recent high-profile accidents involving defective or polluting cargo in the hold. The shipping industry also needs to work harder on preventing dark oil transfers from taking place at sea – where many illicit transactions may take place beneath the radar.

Shipping has evolved from a slow, methodical process into one that is highly disruptive, as dark oil transfers from one vessel to another threaten to ruin open maritime trade. A small group of organizations is working with governments, shipping lines, and academic institutions to develop standards and tools that could help prevent such disruptions. A new agreement between several leading shipping lines would require their ships to carry monitoring technology that detects dark oil—a sign that vessels carrying oil cannot pass through with little effort.

So it is no surprise that there is a rise in Ship to Ship (STS) transfers of dark oil going on. The ironic thing is that it has not been calculated into global supply and demand pricing components. So what is the expectation that this will impact the world pricing standards?

This brings up another interesting topic. OPEC and OPEC + have not been able to fully enforce production quotas on their members for some time. So the spoofing or doping of dark oil has been a long-term problem for the accountability of oil production.

The current UAE and Saudi Arabia negotiations add a piece of the puzzle yet to be determined. The UAE has threatened to create its own oil standard to compete with Brent or WTI pricing indexes.

From Reuters today:

As both Iran and Venezuela have boosted exports, cargo trackers have detected an increased number of STS transfers in open waters over the last year. They take place off Malaysia’s coast, at locations off Africa and also in the Caribbean, shipping and trading companies say.

“Shipowners are navigating an increasingly complex environment. A part of this complexity arises from new and advanced practices to evade sanctions,” Maersk Tankers’ chief commercial officer Eva Birgitte Bisgaard told Reuters.

“Bigger players conduct a larger number of voyages, exposing them to more and a greater variety of fraudulent behavior,” she said.

“Shipping, unfortunately, has still very opaque sides to it,” Jan Dieleman, president of Cargill’s ocean transportation division said.

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