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Russian Oil Freight Rates Fall to Lowest Since 2022

Maritime Activity Reports, Inc.

July 10, 2024

© AU USAnakul+ / Adobe Stock

© AU USAnakul+ / Adobe Stock

Freight rates to ship Russian oil have fallen this month towards parity with those for other global exporters for the first time since 2022 as more tankers were available despite Western sanctions and exports fell, three sources said on Wednesday.

Freight rates to ship Russian oil soared to more than $20 million per voyage in 2022 after the West imposed sanctions and a $60 dollar price cap to try to limit Russian export revenues.

The sources who asked not to be named because they were not authorised to speak to the press said rates had fallen as increased Russian refinery activity in July lowered exports and curbed demand for tankers. At the same time, a "shadow fleet" has gradually built up.

The fleet, willing to take the risk of shipping Russian oil despite sanctions, comprises ageing tankers often managed by little-known companies based in Dubai and China, carrying flags of African countries.

India, which has become the largest buyer of Urals oil grade since 2022, is the main destination for tankers leaving Russian ports with oil onboard.

The cost of transporting Urals from the Black Sea's Novorossiisk port to India for Suezmax tankers, which can hold 140,000 metric tons, fell to around $4.3-4.5 million for a one-way trip, having dropped by about $1.5-$2 million since the beginning of June, the sources said.

"Freight rates for Suezmax tankers (on routes from Novorossiisk to ports in western India) have fallen dramatically over the past month. The rates are close to general market estimates for non-sanctioned crude", Viktor Katona, head of crude oil analysis in energy consultancy Kpler, told Reuters.

Suezmax tanker freight to transport Kazakhstan-produced CPC Blend oil, which is not subject to sanctions, to India in July was $4.8 million per route, one of the sources said.

CPC Blend oil is loaded from the Yuzhnaya Ozereyevka terminal in the south of Russia close to Novorossiisk.

According to the sources, the cost of transporting Russian oil to India for loading at the end of July from the Baltic ports of Primorsk and Ust-Luga has dropped to approximately $4.7-$4.9 million from $5-$5.5 million in mid-to-late June. In early June the cost of such a voyage exceeded $6 million.

The fall in freight rates in the Russian oil transportation market supports Urals prices on a FOB basis, and has taken them further above the price cap limit of $60 per barrel, Reuters data shows.

One of the sources, who is involved in trading Urals, said Greek-managed vessels were the most expensive of those providing shipments from the Baltic to India, adding even these rates are no higher than $5.1 million.

(Reuters - Reporting by Reuters; editing by Barbara Lewis)