A New Problem for Russian Oil Sales Identified 0 11

The desire of Russian companies to use large Very Large Crude Carriers (VLCC) for oil exports has become one of the reasons why the freight cost for such vessels on the route from the Middle East to China has increased sevenfold in a couple of months, exceeding $200,000 per day. This was reported by Bloomberg.

In previous years, Russia used medium-sized tankers for supplies to India. However, due to the longer route, the assembled fleet is no longer sufficient, so to maintain the volume of Russian oil shipments in the Red Sea, larger vessels are being used for transshipment.

At the beginning of January, it was possible to charter a tanker of this class for less than $29,000 per day. The current prices were last observed in 2020, when the price war between Russia and OPEC+ due to the COVID-19 pandemic led to an accumulation of unsold oil on vessels and a shortage for new supplies.

Such costs hit Russian suppliers from two sides. First, redirecting oil flows from India to China increases the route and makes it more expensive. Secondly, the refusal of Indian refineries to purchase complicates the search for buyers, and oil is stored for long periods in extremely expensive tankers.

Another factor contributing to the rise in tanker prices has been the active purchase and leasing of vessels by the South Korean shipping company Sinokor Group in partnership with Italian billionaire Gianluigi Aponte. The entrepreneurs realized the opportunity to profit from such assets and now control about 40 percent of the entire VLCC fleet.

Experts note that if it weren't for their activities, the freight cost for VLCC would never have soared to such levels, but now suppliers have to come to terms with this.

It was previously reported that the increase in oil sales to China is forcing Russian suppliers to significantly increase discounts on their shipments in competition with Iranian oil.