Page 36 - bneMagazine March 2023 oil discount

36 I Cover story bne March 2023
Laden crude oil tanker approaches the port of Qingdao along Jiaozhou Bay shore in the morning fog. www.shutterstock.com
provide reinsurance under international maritime law.
These various add-on services and charges can amount to as much as
an extra $25 per barrel, bringing the “discounted” Urals price per barrel up to close to the cost of a barrel of Brent.
Taking these extras into account Vaku- lenko estimates that the actual cost of
a barrel of Urals is closer to $75 than $50.
At the same time, the combination of selling to “friend countries” such as India or the Kingdom of Saudi Arabia (KSA) that are ignoring the sanctions or schemes like ship-to-ship transfers that create non-sanctioned brands means that 70% of Russia’s seaborne exported oil, some 800,000 bpd is sold at market rates of $70 or more on a FOB basis, openly defying the oil price cap scheme.
Baltic exchange
Prior to the war Russia could sell Urals at Primorsk, its biggest oil port in the Gulf of Finland, on a FOB basis, or the
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customer could buy it in Rotterdam in the Netherlands, a major European oil terminus, on a CIF basis.
Cost, insurance and freight (CIF) is an international shipping agreement, which represents the charges paid by
a seller to cover the costs, insurance and freight of a buyer's order while the cargo is in transit via a waterway.
Oil prices, March-November 2022, $ / BBL
Much of this trade was handled by
the Baltic Exchange, a London-based commodity exchange, that also collected data from members on deals to form prices.
“It is important to remember that Urals FOB Primorsk or Novorossiysk, quoted by Argus and Platts, have never been the proper market prices, derived from
Source: Ministry of Commerce and Industry of India