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Russian Urals resumes VLCC shipping to Asia amid higher demand and freight rates

Russian traders are transferring Urals crude to very large crude carriers for delivery to Asia via ship-to ships, according traders and LSEG data. This practice is being revived by the stronger Chinese demand, higher freight costs, and increased Russian trade.

China is expected to increase its imports of Russian crude oil as the Middle East's conflict causes disruptions in regional supplies.

Russia delivers crude oil to China through pipelines that connect its oilfields to Chinese refiners, and via the Pacific port of Kozmino. During the summer, volumes are also transported from Russia's western port via the Red Sea or the Northern Sea Route.

According to LSEG terminal data the VLCC Della departed waters around Egypt's Suez Port on August 21, bound for?Singapore with about 200,000 metric tonnes of Urals crude. Data showed that the cargo was transferred to the tanker via a ship-to -ship (STS). The traders said that the arrangement was used to offset rising transportation costs due to a rise in freight rates and increased?security risks along global shipping routes. The last shipment of Russian Urals crude oil to?Asia via a VLCC occurred?in the winter.

Urals crude oil is usually transported by sea from Russia to India where the transport costs are lower due to the shorter journey.

Trading sources claim that at least two VLCCs are booked to load Russian crude bound for China via STS operations in the latter part of this month or early in next month. STS transfers are common in the winter, when traders transfer crude oil from Baltic ports to expensive ice-class tanks before transferring them to larger vessels. This reduces overall shipping costs.

One trader stated that "reduced traffic in the 'Strait of Hormuz' and the lifting of Venezuelan sanctions have allowed part of the shadow VLCC fleet to be released, creating new opportunities for Russian oil market participants."

The cost to ship Urals crude via the Suez Canal from the Baltic ports of Primorsk, Ust-Luga, and Novorossiysk on 100,000-140,000-ton tanks to China is estimated at $20 per barrel. This is roughly $2 more per barrel than deliveries to ports on India's western coast. The cost of shipping Urals crude from western ports into India, its main market, has risen in August due to a strong demand for tankers and the mounting security risks associated with carrying Russian oil. Reporting by. Mark Potter (Editing by Mark Potter).

(source: Reuters)