The cost of transporting oil from Russia has almost ceased to decline

As Kommersant found out, despite the global downward trend in the cost of freight for oil cargo, in the Russian Federation it has practically ceased to decline. The reason is that a number of shipowners have left Russian ports due to fears of secondary US sanctions in an environment where Russian oil is trading above the ceiling of the EU and G7 oil prices from Russia (set at $60 per barrel). In addition, the increased frequency of UAF drone attacks caused an increase in the insurance premium for military risks in the Black Sea. However, Kommersant’s interlocutors believe that the niche of the departed companies can also be occupied by the shadow fleet, which is actively increased by Russian companies.

The cost of freight oil tankers on routes from Russian ports practically stopped decreasing by mid-August, even despite the promised Russian export limit of 500 thousand barrels per day (b / d), follows from the review of the Argus agency “Neftetransport”. Thus, the cost of chartering Aframax and Suezmax vessels from Novorossiysk to the western coast of India remained at $3.9 million and $4.4 million per flight, respectively, as at the end of July. In addition, insurance for ships in the region has risen in price to $1 million (about $200,000) per flight due to military risks associated, in particular, with increased attacks by Ukrainian drones. At the same time, rates from the Baltic ports to India, on the contrary, decreased by $200,000 and amount to $4.85 million per flight.

The cost of chartering ships from Russian ports has slowed down due to a decrease in the number of ships ready to transport Russian oil.

A number of shipowners have diverted their fleets from Russian ports as they fear secondary sanctions from the US, while Russian oil has been trading at a price above the ceiling set by the G7 countries (set at $60 per barrel) since July.

These are mainly Greek companies. But some of them, despite the sanctions risks, continue to provide their fleet for the transportation of Russian oil. Kommersant’s interlocutors in the industry believe that the companies that have left the Russian oil transportation market will be replaced. In particular, according to Kommersant, Russian companies continue to attract ships to increase their shadow fleet.

World freight rates in the face of fierce competition between ship owners against the backdrop of limited supply by the Russian Federation and Saudi Arabia continue to decline. “In the region of the Atlantic, the Mediterranean, the number of tankers prevails over the amount of cargo offered for transportation. Many vessels that previously handled Russian cargo are now waiting, and shipowners agree to a reduction in the cost of the lease, ”Argus quotes one of the brokers.

Freight rates for Russia’s maritime exports should rise in September-October as Russian exports pick up, Kpler’s Victor Katona said. In July-August, maritime exports amounted to 3–3.1 million bpd, but by October the market should return to its previous levels of 3.5 million bpd and higher. According to him, instead of 145 tankers per month, by October, the average monthly use will increase to 160 tankers.

Despite the growth of the so-called gray fleet, about a third of shipments still take place using European, mainly Greek, shipping companies, Mr. Katona notes. Increased export rates will inevitably increase freight rates along the Baltic-India route just at the moment when European oil markets go into hibernation caused by seasonal repairs at refineries.

In the Black Sea, freight rates, which reached a minimum in mid-August, have been growing for the last two weeks. The size of the insurance payment for war risks has increased by at least $200,000 and is already almost $1 million per ship, and some Greek companies have not decided whether they are ready to continue transporting Russian shipments, explains Victor Katona. “A number of Greek companies are still in the game, but the shrinking pool of shipowners may now demand higher rates,” he says. Unlike the Baltic ports, however, there will be little growth in Black Sea exports in September, and after recent drone attacks on ships in the Black Sea, exporters may be reluctant to take on unnecessary risks that are completely absent in the Baltics.

Dmitry Kozlov