- Urals Oil Prices Drop Below $60, Lowering Shipping Costs.
- Western Shipowners Resume Services for Russian Oil.
- Freight Costs May Fall Further Amid Possible Russia-Ukraine Truce.
Freight costs for Russian oil exports from Baltic terminals to India are falling after already hitting all-time highs. This is due to higher offers from Western shipowners after the price of Urals crude oil fell below the $60-per-barrel price ceiling, two traders said, reports Reuters.
Effect of Price Cap on Russian Oil Exports
The Group of Seven (G7) nations, in collaboration with the EU, put a price cap late in 2022. The limitation denies access to Western shipping and insurance if Russian oil is exported at more than $60 per barrel. The aim is to reduce Moscow’s war funding in Ukraine.
Current Freight and Oil Prices
The cost of shipping Urals oil from the Baltic ports of Primorsk and Ust-Luga to India decreased to a mean of $7 million per one-way trip. Previously in March, it was at a 12-month high. Up to Wednesday, the price for Urals oil loaded from the port of Primorsk was around $57 per barrel.
Western Shipowners Reenter the Market
With Urals crude staying below the $60-per-barrel limit, more Western shipping companies have resumed their services. A trader noted:
“Urals has been below the limit (of $60 per barrel) for quite a long time now, so many shipowners have entered the market and are offering good prices.”
Future Prospects for Freight Rates
Freight prices can still be reduced if there is a truce between Russia and Ukraine in maritime and energy. Nevertheless, information on whether or when the Black Sea maritime security agreements would commence is vague.
Sanctions and Their Impacts on Shipping Prices
Russian crude freight rates spiked after the recent U.S. sanctions on Russian energy interests in January. Russian oil sellers were forced to charter new tankers to replace ones hit by the sanctions. Even though rates have declined, they remain much above January levels when it cost $4.7 million to $4.9 million to ship Russian crude from Baltic ports to India.
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Source: Reuters
