Russian Urals crude prices fall back towards G7 price cap – traders
Urals crude oil prices at Russian ports have fallen back towards a price cap imposed by Group of Seven (G7) countries, weighed by rising freight rates and weaker Brent crude prices, traders said and Reuters calculations showed.
Russia’s main export grade has been trading above the $60 per barrel Western price cap since mid-July amid output cuts by OPEC+ producers including Saudi Arabia and Russia.
But weaker Brent prices and a recent jump in freight rates for the Russian grade have led to a significant drop in free on board (FOB) Urals prices in Russian ports, meaning lower profits for Russian oil companies and losses for the state budget.
Under the terms of the G7 cap, buyers are only able to use Western services such as shipping and insurance when Russian crude trades below $60 per barrel.
Calculated FOB estimates for Urals cargoes loading from Baltic ports for India at the end of November and early December were at $63-64 a barrel on Friday, according to traders’ data and Reuters calculations.
That is well below the $81.52 per barrel October average for the blend and $83.30 in September, the Russian Finance Ministry said on Monday.
Freight costs for Russian oil jumped last month after the U.S. imposed sanctions on two tankers carrying Russian oil.
The cost of Russian Urals oil shipments from Baltic ports of Primorsk and Ust-Luga to Indian ports rose to nearly $8 million per voyage, up from recent estimate of $7.5 million last month. The cost of freight in September was around $5 million.
The exit of several shipowners from the Russian oil market following the U.S. warning and bad weather are the main reasons behind rising freight rates, two traders said.
Meanwhile Urals oil prices in Indian ports remained well supported amid healthy buying demand, traders said.
Cargoes for loading late in November and December traded at a discount of $4-5 per barrel to Brent, while some cargoes were done below $4, according to three sources involved in Russian oil sales to India.
Indian refiners buy Russian oil on a delivered basis, while the supplier bears all the shipping and insurance costs.
Oil prices are set to fall for a third week as concerns of supply disruptions from the Israel-Hamas conflict have ebbed.
Source: Reuters (Reporting by Reuters reporters in Moscow, Nidhi Verma in New Delhi; Editing by Jan Harvey)