Freight rates for Russian oil supplies from its Baltic ports to India are declining from recent record highs amid an increase in offers from Western shipowners after Urals crude oil prices fell below a price cap of $60 per barrel, two traders said.
The Group of Seven countries, in coordination with the EU, imposed the price cap in late 2022 that blocked access to Western shipping services and insurance if Russian oil was purchased at more than $60 a barrel, aiming to reduce Moscow’s ability to finance its Ukraine war.
The cost of shipping Urals oil from the Baltic ports of Primorsk and Ust-Luga to India fell to $7 million per one-way shipment on average after rising to a 12-month high early in March.
Global oil prices fell in March, which pushed the price of Urals crude in Russia’s ports below $60 per barrel, allowing more Western shipping companies to resume services for Russian oil, including freight.
As of Wednesday, the cost of Urals oil loaded from the port of Primorsk was about $57 per barrel.
“Urals has been below the limit for quite a long time now, so many shipowners have entered the market and are offering good prices,” said one Urals trader.
Freight rates for Russia’s crude may fall further amid a maritime and energy truce between Russia and Ukraine, if implemented. It is not clear when or how the Black Sea maritime security deals would start.
Russian crude shipping rates rose sharply after a new round of U.S. sanctions on Russian energy interests announced in January came into effect. Russian oil sellers were forced to look for new tankers to replace those hit by sanctions.
Freight rates still remain significantly above levels in January, when the cost of shipping Russian crude from the Baltic ports to India was $4.7-4.9 million.