Russian oil shipping costs to India easing amid fleet supply, weak market, sources say
MOSCOW, Sept 2 (Reuters) -Freight rates to ship Russia's Urals crude to India have fallen further and remain at their lowest since Western countries introduced a price cap late in 2022, boosting the economics of Moscow's oil exports, industry sources told Reuters on Monday.
Prices for Urals in India have also strengthened, keeping estimates on a FOB basis in Russian ports URL-PRMSK, URL-NVRSK almost $10 above the price cap limit, Reuters calculations shows.
The Group of Seven countries (G7), including the United States, and the EU have imposed a price cap on Russian seaborne shipments of crude oil since December 2022 as part of sanctions on Moscow.
Buyers are only able to use Western services such as shipping and insurance when Russian crude trades below $60 per barrel.
According to the sources, the cost of transport to India for loading mid-September from Russia's Baltic ports of Primorsk and Ust-Luga by tankers which can hold 100,000 metric tons has dropped to approximately $4.25-$4.50 million from $4.7-$4.9 million in July-August.
The cost from the Black Sea port of Novorossiisk to India for Suezmax tankers, which can hold 140,000 tons, fell to around $3.8 million for a one-way trip from $4.3-$4.5 million over the same period, the sources added.
September freight rates for transporting Urals crude from Russia's western ports to India are down by 9-13% from summer levels, which were already the lowest since 2022, Reuters calculations showed.
"Now the cost of transportation (of Russian oil) is almost the same as it was in a normal market (before Western sanctions), but it's, of course, more difficult to work due to higher scrutiny of price cap compliance," a source involved in the transportation of Russian crude said.
Freight rates for vessels carrying Russian crude are falling amid general weakness in the freight market as seasonal turnarounds at oil plants around the world approach, one of the sources said.
The fall in freight rates for Russian oil is also attributed to a build-up in the fleet willing to take the risk of shipping Russian oil despite sanctions, including the so-called "shadow fleet" as well as Western companies.
Western carriers are mainly represented by companies registered in Greece, while the shipping companies managing the "shadow fleet" tankers are mainly based in Dubai, China and African countries.
Greek-managed vessels may have increased their activity in the Russian oil market amid a general decline in business profitability, one of the sources said, while the expected rise in Russia's seaborne oil exports in September provided little support to freight rates.
Urals estimates on a FOB basis have been almost constantly above $60 per barrel since the beginning of 2024, Reuters calculations show.
Reporting by Reuters; editing by Jason Neely
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