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the International Energy Agency.
Russia's ability to keep prices in its Baltic ports below the cap has allowed it to employ ships with western insurance coverage. More than half of the vessels on the route during that quarter were G7-insured, with 46 of them run by Greek ship managers.
Customs records issued in Russia from December until the end of June indicate that the average price of crude oil shipped to India was around $50 per barrel in Russia’s Baltic ports. This kept the sales in line with the cap, which applies to the so-called “free on board” (FOB) price, or the cost of the oil at the port of loading, reports the Financial Times.
But Indian customs data shows that the prices actually being paid in India after delivery — the so-called “cost, insurance and freight” (CIF) price — over the same period had amounted to $68. This was a marked discount on world oil prices, which averaged around $79 per barrel over the period, but implies an $18 per barrel rise in prices between the Baltic and India.
Figures from Argus, a pricing agency, also point to a large spread. Argus estimates that the average price of Urals crude has been $14.90 per barrel higher in India than in the Baltic since data started to be collected in February. This is in excess of Argus’s estimates of the actual price of shipping, which has averaged around $9 per barrel, the Financial Times reports.
However, recent spikes in international crude prices, rallying 15% in July to near $85 a barrel, have led to higher Russian prices and close to the cap. Argus has assessed that average quoted prices in Primorsk, a major Baltic port, rose above $60 in July.
This in turn has made it more challenging for western-linked companies to operate within the cap. Greek-domiciled ship managers have already started leaving the Russian crude market in response as prices for Russian oil approach the sanctions cap.
The International Energy Agency said on August 10 that Russia’s oil export revenues in July reached their highest level since the cap was introduced, even without including inflated freight costs, reports the Financial Times.
There are concerns that the higher prices could discourage buyers. Indian imports, which account for around a quarter of Russia's crude and refined oil exports, might decline due to reduced discounts and increased prices. This situation has led to growing anxiety among Indian banks and the broader energy industry. An Indian oil official told the FT that the discount was now just $2 to $10 a barrel.
“Indian imports may now decline, as the discounts aren’t as generous,” said Amrita Sen at Energy Aspects told the Financial Times. “Their banks are also getting anxious now there are signs that most cargoes are trading above the price cap.”
RUSSIA Country Report September 2023 www.intellinews.com