As winter approaches, traders are warning that freight rates for transporting Russian oil are expected to rise sharply. This comes after the UK introduced more severe sanctions aimed at Russia’s shadow fleet of merchant ships. These sanctions, along with the seasonal challenges brought by winter weather, are creating a perfect storm for increasing shipping costs.
Sanctions Impact on Freight Rates for Russian Oil
The UK recently imposed tough new sanctions on Russian oil shipments, targeting a group of ships known as the “shadow fleet.” These vessels have been used to bypass Western restrictions and continue Russian oil exports to countries that are not part of the Western sanctions. The UK’s new restrictions are targeting 30 ships, bringing the total number of vessels under sanctions to 73. This significant reduction in the number of available vessels will drive up freight rates for Russian oil, as fewer ships will be available to carry oil from Russia to global markets.
With fewer ships in operation, shipping costs are expected to increase. The sanctions are likely to place greater pressure on the freight rates for Russian oil shipments, particularly as demand remains high for the available tankers. As these vessels are now prohibited from operating in UK-controlled waters, traders expect that alternative routes will become more costly, further impacting the overall shipping expenses.
Stable Shipping Rates With a Twist
Despite these sanctions, traders have reported that freight rates for Russian oil shipments have remained stable in recent months. For example, shipping oil from Russian ports like Primorsk and Ust-Luga to India has not seen any major changes in price over the past two months. This stability is mainly due to the fact that there has been a sufficient number of oil tankers available. However, this situation is expected to change soon.
Traders have pointed out that the supply of oil tankers might not be enough to meet the demand during the winter months. While freight rates have held steady at around $4.9 million to $5 million for a standard shipment of Urals oil from Russia’s Baltic ports to India, the growing seasonal demand for tankers could soon push these rates higher.
EU Moves to Stop Russia’s Shadow Fleet from Endangering Waters
One of the main reasons for this is that the supply of ships is starting to shrink. As the winter months arrive, the amount of oil shipped by sea is expected to drop. Fewer oil shipments mean that the demand for tankers will be spread across a smaller number of voyages, causing shipping prices to rise.
Winter Weather Pushing Freight Rates Higher
Winter weather conditions are another key factor expected to drive up freight rates for Russian oil shipments. As the temperatures drop, ice begins to form along the Baltic Sea, making navigation more difficult for ships. The need for specialized ICE-class tankers—ships that are capable of navigating through icy waters—is increasing. However, ICE-class tankers are not easy to find, and the limited supply of these specialized vessels will further push up freight rates for Russian oil.
Additionally, the weather in the Black Sea is expected to worsen as winter sets in, causing disruptions to oil shipments. Strong winds, rough seas, and ice conditions can lead to longer transit times and delays for oil tankers passing through important shipping routes like the Turkish Straits. These weather disruptions will raise freight rates, as longer transport times mean higher costs for oil companies. For example, the freight rates for tankers passing through the Turkish Straits have already increased to their highest levels since February 2024, as delays of up to 10 days have become more common.
The worsening weather conditions and the need for specialized vessels are causing freight rates to rise. As winter weather continues to affect shipping routes, the cost of transporting Russian oil will likely increase further. The combination of new sanctions, the shrinking number of available ships, and the difficulties presented by winter conditions all point toward higher freight rates for Russian oil shipments in the near future.
