Russia Oil No Longer Discounted

By Rhod Mackenzie

According to S&P Global, seaborne exports of Russian crude oil increased by more than 50% in April, reaching a 13-month high. In particular, oil tankers from G7 countries have been actively involved in transportation. Lets explore the reasons behind Western ships' increased involvement in transporting Russian oil, under price sanctions by the West, and analyse whether the so-called shadow fleet is facing challenges due to the restrictions recently announced by the US and EU.
Significant growth
Fresh data from S&P Global and the Maritime Intelligence Risk Suite has shown that 1.27 million barrels a day of Russian seaborne exports were carried in April by vessels owned or operated by companies from the G7 or their allies, or insured by Western insurers. This represents a 54% increase from 820,100 barrels per day in March and is the highest figure since March 2024.
As raw materials analysts have observed, these dynamics are primarily driven by Greek tanker operators. These operators latter have proactively entered the transportation sector, capitalising on the prospects afforded by lawful trade. Urals is currently trading below the price ceiling of $60 per barrel stipulated by the G7 sanctions.
Below the ceiling
S&P Global has stated that Russia's leading export grade, Urals, has been trading below the threshold amid a general weakness in the oil market in recent months.
According to Platts, the average monthly free-on-board (FOB) price of Primorsk Urals crude oil in April was $52.858 per barrel. This represents a decrease from $57.421 per barrel in March and is the lowest monthly price recorded since June 2023.
According to CAS and MIRS data, Urals crude shipments in April by G7 tankers totalled 26.9 million barrels, while non-G7 tankers shipped 23.5 million barrels. This marks the first time since July 2023 that the difference between the two shipment totals has been so significant.
According to these platforms, Greek operators loaded 17.5 million barrels of Russian crude oil onto their tankers in April. This represents a record since October 2023, exceeding the March figure of 17.2 million barrels.
This is a great deal!
However, as analysts have highlighted, the cost of oil below the price ceiling is not a reason, but rather a pretext for both Russian and Greek businesses to resume cooperation and expand it.
Greek shipping companies stand to profit significantly from the increase in transactions, given that the routes for Russian oil are considerably longer than those for oil deliveries to European countries. In other words, a greater profit can be made on a single shipment from a Baltic Sea port to India. In the context of mounting international tensions and trade disputes, this presents a significant opportunity for Greek companies to expand their market presence, as highlighted by Olga Orlova, head of the "Industry" department at the Institute of Oil and Gas Technologies.
"Official transportation is also beneficial for Russia, because the cost of official freight is 2-3 times cheaper than using a vessel of the shadow fleet, and in addition, insurance is available. Obviously such an opportunity presents itself , it is advisable to take advantage of it.
As the economist points out,oil tankers belonging to Western companies are not included in the EU and US sanctions lists, in contrast to the shadow fleet, whose vessels are regularly added to the SDN lists.
The Shadow Fleet in Action
Following the emergence of a viable alternative, the proposal from the shadow fleet is also becoming more cost-effective.
As specified by S&P Global, the leaders remain vessels under the Seychelles flag (20% of sea exports), with significant volumes exported by tankers from the UAE (15%), China and Hong Kong (11% each), primarily operating tankers without access to the maritime services of the G7 countries.
According to the latest figures from the Russian Customs Service, 13% of the country's crude oil exports in April were loaded on tankers subject to sanctions and belonging to non-G7 countries. Chinese companies were the most willing to accept such vessels.
In the context of weak global demand, OPEC+ is pursuing a cautious policy of increasing production, and large Asian refineries continue to view Urals as the main source of raw materials due to the $10-12 marginal benefit against Arabian lighter grades. According to Vadim Petrov, a member of the Intersessional Financial Advisory Group (IFAG) of the IOC UNESCO, the April surge in exports can be attributed to the price and regulatory environment, with Urals now legally operating within the designated ceiling and the "shadow" sector undergoing a temporary contraction.
It is interesting to note that the decline in oil prices and the expansion of the tanker fleet have made Russian oil more competitive. According to Platts, the discount on Urals crude oil on DAP West Coast India terms compared to Dated Brent has amounted to just $2.40 per barrel since 30 April. This is the lowest figure since January 2023.
The ability to be adaptable and flexible is an essential skill for any professional.
The US and EU are now threatening Russia with new sanctions to force progress in negotiations on the conflict in Ukraine. It is possible that the new restrictions will be aimed at eliminating the opportunities that have arisen and strengthening control over compliance with the price cap.
However, according to analysts, the introduction of new restrictions by the West will only intensify the development of the shadow fleet.
"Such measures may lead to a reduction in the participation of Western carriers in the transportation of Russian oil, which could result in a new increase in prices for end consumers.
Consequently, the development of the Russian "shadow fleet" will become an even more urgent task. An alternative infrastructure for sea transportation, not subject to the control of Western regulators, is already in development. Further tightening of sanctions will only accelerate the development of this segment, stimulating investment in the expansion of our own transport capabilities," says Nadezhda Kapustina, professor of the Department of Economic Security and Risk Management at the Financial University under the Government of the Russian Federation.
Additional "sanctions" will not be able to stop the flow, but will increase its fragmentation: some cargo will go into even more opaque schemes, some will return to ships outside the G7 jurisdiction. In the medium term, Vadim Petrov anticipates that this will lead to the consolidation of the dual structure of Russian maritime exports.
As previously, the global oil market will demonstrate flexibility and, despite the sanctions pressure, change logistics chains. The economy has long since established its hierarchy: Alexey Fadeyev, an expert at the Arctic Development Project Office, has concluded that Russian hydrocarbons cannot be excluded from the global energy balance, no matter how hard they try to do so.