Russia is benefiting from higher revenues from oil sales, despite the West’s attempts to curb funds for its war in Ukraine.
So far in April, India and China have bought the bulk of Russia’s oil at prices above the Western price cap of $60 a barrel, according to calculations by traders and Reuters.
That means the Kremlin is enjoying higher revenues, despite the West’s attempts to curb funds for Russian military operations in Ukraine.
A G7 source told Reuters on Monday that the Western price cap would remain unchanged for now, despite pressure from some European Union countries, such as Poland, to lower the cap to increase pressure on Moscow.
The cap’s proponents have said it cuts revenues for Russia while allowing oil to flow, but detractors argued it is too soft to force Russia to reverse its activities in Ukraine.
The most recent data from Refinitiv Eikon suggested that Russian Ural oil cargoes loaded in the first half of April are mainly going to the ports of India and China.
India accounted for more than 70 percent of overseas supplies of the species so far this month and China for about 20 percent, Reuters calculations showed.
Meanwhile, lower freight rates and smaller discounts for the Urals against global benchmarks pushed the daily price of the class back above the limit earlier in April after a period of trading below it.
India and China have disagreed on adhering to the price cap, but the West had hoped the threat of sanctions could deter traders from helping those countries buy oil above the cap.
Average discounts for Ural were $13 per barrel for dated DES (delivered ex-ship) based Brent at Indian ports and $9 for ICE Brent at Chinese ports, according to traders, while shipping costs were $10.5 per barrel and $10.5 per barrel respectively. 14 per barrel for cargoes from Baltic ports to India and China.
That means the Ural price on a free on board (FOB) basis in Baltic ports, with about $2 per barrel in additional transportation costs, was slightly above $60 per barrel so far in April, Reuters calculations showed.
Lower freight rates
Transport costs have fallen significantly in recent weeks as ice conditions in the Russian port eased and more tankers became available.
Freight rates for Ural cargoes loaded at Baltic ports for delivery to India have fallen to $7.5-$7.6 million from $8-$8.1 million two weeks ago, two traders said.
The cost of transporting a tanker from the Baltic ports to China was $10 million, down from nearly $11 million a few weeks ago, they added.
During the winter, freight costs for Ural cargoes rose above $12 million for both India and China.
Lower freight costs suggested Russian oil suppliers have secured enough ships even for long distances, the traders said.
Meanwhile, the production cuts announced in early April by the OPEC+ group of oil producers have also led to higher values for several grades around the world, including the Urals.
Ural prices in Indian ports traded at a discount of $14-$17 per barrel against Brent on a DES basis in March, while the price in Chinese ports was around $11 per barrel against ICE Brent.