Urals crude resumes VLCC shipments to Asia

⑴ Driven by a rebound in Asian procurement demand and rising maritime freight rates, Russian traders have resumed the offshore ship-to-ship transfer model, loading Urals crude onto VLCC supertankers for shipment to the Asian market. ⑵ Geopolitical disturbances in the Middle East have tightened regional crude oil supply, and the market expects China to further increase its purchases of Russian crude. Russian crude supply to China involves multiple routes, including pipeline transportation and seaborne shipments from Kozmino Port. ⑶ Data show that one VLCC has already completed a crude transfer operation and departed waters near the Suez, carrying about 200,000 tons of Urals crude toward Singapore. At least two more similar vessels are scheduled for the same type of transport from late this month to early next month. ⑷ In previous years, such transfer operations were mainly conducted in winter. Currently, they are primarily used to hedge against the upward pressure on freight rates caused by heightened global maritime route security risks. The previous round of VLCC shipments of Urals crude to Asia also took place in winter. ⑸ Lower throughput in the Strait of Hormuz and the adjustment of Venezuela-related sanctions, which releases some idle tanker capacity, have provided operational room for Russian crude oil trade. The unit shipping cost from Suez Canal to China is higher than that to the west coast of India. ⑹ In August, shipping costs for Urals crude to core market India surged, as tight vessel availability coupled with rising security risks in shipping resulted in a substantial increase in overall maritime expenses.