MOSCOW: Russian traders have resumed transferring Urals crude onto very large crude carriers (VLCCs) for deliveries to Asia via ship-to-ship operations, traders said and LSEG data showed, as stronger Chinese demand and higher freight costs revive the practice. China is expected to increase imports of Russian crude as conflict-related disruptions in the Middle East tighten regional supplies, traders said.
Russia supplies crude to China via pipelines linking its oilfields with Chinese refiners and by sea from the Pacific port of Kozmino. Volumes also move from Russia’s western ports via the Red Sea and through the Northern Sea Route during the summer navigation season. According to LSEG terminal data, the VLCC Della departed waters near Egypt’s Suez port on August 21 bound for Singapore carrying about 200,000 metric tons of Urals crude.
The cargo was loaded onto the sanctioned tanker through a ship-to-ship (STS) transfer, the data showed. Traders said the arrangement was being used to offset rising transport costs as freight rates climb amid heightened security risks on global shipping routes. The last known shipment of Russian Urals crude to Asia on a VLCC was in winter. Urals crude is normally supplied by sea to India, where transport costs are lower because of the shorter voyage from Russian export terminals. According to trading sources, at least two VLCCs have been booked to load Russian crude destined for China via STS operations later this month or early next month. STS transfers are commonly used in winter, when traders move crude from Baltic ports on costly ice-class tankers before transferring cargoes to larger vessels to cut overall shipping costs.
“Reduced traffic through the Strait of Hormuz and the easing of sanctions on Venezuela have freed up part of the shadow VLCC fleet, creating opportunities for participants in the Russian oil market,” one trader said.
Market participants estimate the cost of shipping Urals crude from the Baltic ports of Primorsk and Ust-Luga and the Black Sea port of Novorossiysk to China via the Suez Canal on 100,000 to 140,000-ton tankers at around USD20 per barrel, roughly USD2 per barrel more than the cost of deliveries to ports on India’s west coast. Freight rates for tanker shipments Urals from western ports to India, the grade’s main market, have surged in August as strong demand for vessels and mounting security risks linked to carrying Russian oil drove up costs.
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