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Costs to Ship Russian Oil Rise as Daily Rates Near $350,000

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April 12, 2022

By Alex Longley (Bloomberg) —

Daily earnings for tankers shipping oil from Russia’s Baltic ports are soaring as shipowners continue to exercise caution about hauling the country’s crude. 

It now costs more than $348,000 a day to charter an oil tanker from the port of Primorsk to northwest Europe. That’s the highest since at least 2008, according to data from the Baltic Exchange in London. 

The increase is another sign of the discounts Russian producers will have to apply to their supplies in order to find buyers. 

Russian Urals crude was offered at almost $35 a barrel below the Dated Brent benchmark price last week, at a time when tanker earnings were about $100,000 a day lower than they are now. Assuming a freight cost of about $7 a barrel, it means producers would receive a discount of more than $40. 

Rates for cargoes from Russia have been spiking since the war broke out. Most owners have steered clear of dealing with Russian cargoes and ports, as a raft of self-sanctioning sweeps over the oil industry, pushing up costs.

For smaller Aframax ships, which carry about 700,000 barrels of oil, the situation has been compounded by Russia’s Sovcomflot PJSC being the largest owner of such vessels. With traders staying away from Russian entities, the availability of smaller ships has decreased.

Additional costs have also been mounting. London insurers recently extended their list of areas where underwriters can charge extra premiums to all Russian waters. At the start of the conflict those so-called Listed Areas included only parts of the Black Sea and Sea of Azov, but now additional costs are filtering through to other export ports. 

Last week, ships entering the Black Sea were almost uninsurable as underwriters were asking for as much as 10% of the value of a ship’s hull to cover a voyage. 

© 2022 Bloomberg L.P.

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