Russia-India Oil Freight Rates Stay at Record Highs on Risks and Vessel Shortage

Freight rates for oil shipments from Russia's western ports to India stayed at all-time highs at the end of October, reflecting Black Sea risks and a shortage of vessels amid disruptions and strong global demand, according to three trading and shipping sources consulted.

High freight rates are pushing up costs for Russian oil exporters, as Western sanctions force Russia to ship most of its crude from its western ports to Asia, mainly India and China, via long and costly routes. Freight costs for shipping Urals crude to India currently stand at around $30 per barrel or more, depending on the shipowner and destination, up from about $20 in September.

Shipping a cargo of roughly 100,000 tonnes aboard an Aframax tanker from Russia's Baltic ports to western India held at around $23 million per one-way voyage, up from $13-16 million in September. A Suezmax tanker can be chartered on the same route for about $27 million, the sources said, noting that transport costs are squeezing sellers' margins more than ever. In addition, shipping Urals crude from the Black Sea to India aboard Suezmax tankers, with a capacity of about 140,000 tonnes, hit a record $30 million per one-way voyage, up from around $19 million in September.

Oil shipments from the Black Sea have been severely affected since the summer due to persistent drone attacks and war-related tensions in the region, causing long delays in exports. According to shipbroker Riverlake, the cost of shipping a 140,000-tonne crude cargo from the Black Sea to the Mediterranean held at 952 Worldscale points in October, just below the roughly 1,000 WS points recorded earlier that month.

One source noted that oil sellers are pushing for lower rates, but shipowners are unwilling to offer discounts. Another source said the upcoming winter season is likely to worsen the situation further, as weather conditions will make shipping even more difficult.