MOSCOW (Reuters) – Oil freight rates from Russia’s Baltic ports to India are up some 50% since last week as more shipowners quit the market after the first U.S. sanctions on shipowners carrying Russian crude priced above a G7 cap, three sources said on Tuesday.
The Group of Seven (G7) countries imposed sanctions in December last year prohibiting shippers or insurers domiciled in member countries from offering services to facilitate Russian oil exports when the price is above $60 a barrel.
The sanctions do not apply to shipping companies or insurers from other countries, regardless of the price.
“Freight rates rose to some $7.5 million per voyage on Monday from $4.5 million-4.8 million last week,” a source with a trading firm involved in Russian oil sales told Reuters.
“Some vessels were put on subs above $7 million as more shipowners, especially Greek, decide to exit Russian business. Some have quit a month ago, but today the number of such companies went up,” the source said.
“The freight market is bullish in general, with rates going up for West Africa-U.S. Gulf, West Africa-Mediterranean and cross Mediterranean routes, tempting shipowners to seek safer alternatives,” the source added.
Higher shipping rates and payment issues amid rising U.S. control over Russian oil shipments may put Moscow’s plan to trim discounts for its oil on the global market on hold, one of Reuters’ sources said.
“Urals discounts (on a cost, insurance and freight basis) may widen due to higher freight, transaction costs and sanction risk,” another trader in the Russian oil market said.
Russian crude discounts to global benchmarks have stabilised at $11-12 per barrel from $35-38 per barrel in early 2023, Russian Deputy Prime Minister Alexander Novak said in an interview broadcast last Friday.
Shipping costs for Russian oil have been gradually declining since winter, when the price cap was implemented, amid growing vessel numbers and as many shipowners, including in Europe, were attracted to the market by high rates.
The decline in shipping costs helped Russian oil exporters to increase profits.
The U.S. and its partners in the G7 were committed to denying Russia any energy revenues, U.S. Assistant Secretary for Energy Resources Geoffrey Pyatt said on Friday.
(Reporting by Reuters; Editing by Jan Harvey)