Russian oil shipping costs surge ahead of embargo — Bloomberg

2 December 2022, 01:51 PM
Oil tanker, illustrative photo (Photo:Vesselfinder)

Oil tanker, illustrative photo (Photo:Vesselfinder)

The cost of shipping Russian oil is soaring as, just days before a European embargo takes effect, a growing number of tanker owners refuse to carry the Kremlin’s crude, news agency Bloomberg reported on Dec. 1. 

Costs are rising because tanker owners who are still willing to carry Russian oil are charging higher risk fees. According to ship brokers, rates for shipments between the Baltic Sea and India have risen to $15 million, or $20 per barrel, for loading after Dec. 5, the date when the new EU restrictions come into effect.

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Earlier, transportation on this route cost in the range of $9-11 million.

"The surge in costs reflects the challenges faced by suppliers of Russian crude ahead of the deadline when the EU, including some of the world’s top tanker owners in Greece, will stop extending shipping and other services for oil produced by the OPEC+ nation,” Bloomberg said.

“Fewer available ships and the need for Russian oil to be diverted from traditional buyers in Europe to new ones in Asia and the Middle East are also contributing to higher rates.”

At the same time, excessive freight costs, in turn, undermine the value of Russian Urals grade, which is losing its competitive advantage.

The current situation contributes to the transition to Russian oil being delivered by the so-called “dark fleet” — tankers belonging to unknown owners who are ready to continue transshipment, despite the threat of sanctions. These are mostly older vessels, many of which have experience working with sanctioned regimes such as Iran.

Earlier, it was reported that the EU countries had agreed to introduce a ceiling price for Russian oil at $60 per barrel.

Moscow stated that it will not sell oil and gas to countries that are observing the restrictions.

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