Shipping Costs Surge Amid Russia Sanctions; India’s Oil Imports Set to Fall to Three-Year Low in December

Freight prices have surged to their highest levels in more than five years as buyers seek alternatives to Russian crude amid ongoing Western sanctions and increased supply from West Asia and the US. Benchmark rates for very large crude carriers (VLCCs), which can transport up to 2 million barrels from West Asia to China, rose to nearly $137,000 a day last week—up 576% so far this year, according to reports. A broader index covering VLCC rates across major routes also climbed to $116,400 a day, a five-year high, Bloomberg reported.

The jump in freight prices comes as sanctions imposed by the US, the European Union, and the UK on Russian fleets tighten compliance requirements and reduce available tonnage, pressuring buyers of Moscow’s oil to shift away from Russia.

Russia Offers India Oil at Deeper Discounts

A separate Bloomberg report said Russia’s flagship Urals crude is being offered to Indian refiners at the cheapest price in nearly two years after the West sanctioned Russia’s largest producers, Rosneft and Lukoil, last month. The price of Urals for Indian refiners has dropped to as low as $7 per barrel below Dated Brent on a delivered basis, the report said, citing sources. The offer is for cargoes loading in December and arriving in January, they added.

Indian refiners have already begun seeking alternative suppliers—including the US and Saudi Arabia—in recent weeks as the sanctions took effect. Most refiners have skipped placing new orders for Russian crude, aligning with the West’s aim of restricting Moscow’s oil revenue and pressuring President Vladimir Putin to end the war in Ukraine.

India’s Russian Oil Imports to Fall to Three-Year Low

India’s imports of Russian oil are expected to hit their lowest level in nearly three years in December, falling sharply from multi-month highs in November. The drop comes as refiners seek alternative suppliers to avoid violating Western sanctions on Russia’s oil sector, Business Standard reported. Most major Indian refiners, including Mangalore Refinery and Petrochemicals Ltd., Hindustan Petroleum Corp. (HPCL), and HPCL-Mittal Energy Ltd., have halted new Russian purchases.

Nayara Energy, partly owned by Russia’s Rosneft, is now almost exclusively processing Russian oil after other suppliers withdrew following EU and British sanctions.

India is also under pressure to increase purchases of US energy after Washington doubled tariffs on several Indian imports to 50%, citing New Delhi’s continued purchases of Russian crude. The share of US oil in India’s import basket in October surged to its highest level since June 2024 as refiners tapped arbitrage opportunities.