Russia’s crude oil supplies collapse due to standstill at major export terminal Ship’s crew

(Bloomberg) –

Russian crude oil flows to international markets via sea routes declined last week, but the most likely cause is maintenance work, not production cuts.

In the week ended June 25, crude oil flows through Russian ports fell by about 980,000 barrels a day. Deliveries were down from all regions, but the hardest hit was the Baltic Sea, where less than half the normal number of tankers were loaded in Primorsk. The port was responsible for more than half of the weekly decline in the country’s total seaborne crude oil exports.

Crude oil shipments via Primorsk fell by exactly the same amount in the same week last year, and the pattern can also be seen in 2020 and 2021, albeit a week earlier. In all three years, shipments rebounded the following week.

There was a gap in the loading program for the port as no cargo was loaded between 21 and 25 June due to full loading, suggesting the decrease in flows was planned. The program then reverts to its more normal pattern of loading at least one load each day for the remainder of the month.

There was also a sharp drop in shipments from the Pacific, where flows fell by more than 200,000 barrels per day on a weekly basis. A decrease in shipments from Kozmino was partially offset by an increase in inflows from Sakhalin Island. But it’s also unlikely to reflect a production cut. For exports from Pacific ports, prices are higher than exports from the west of the country and delivery times to key markets China and India are shorter, making cuts in shipments from Kozmino unlikely. A gap in Kozmino’s loading program suggests that the drop in inflows from the port will also be temporary.

Moscow has previously said that the reduced flows due to production cuts are being targeted at ports on the Baltic and Black Seas. However, there was no sign of a significant decrease in flows from the Baltic Sea port of Ust-Luga or from Novorossiysk on the Black Sea.

Meanwhile, in the week ended June 21, Russian refiners increased crude oil processing rates to the highest level since April as the country’s downstream maintenance season nears its end.

The short weekend march by the Wagner Group private army towards Moscow should not affect Russian crude oil supplies unless the situation worsens again.

Crude Oil Flows by Destination

On a four-week average, total marine exports fell 263,000 barrels per day to 3.39 million barrels per day through June 25. The more volatile weekly flows also eased, falling about 980,000 barrels per day to 2.55 million barrels per day.

Weekly data is affected by tanker schedules and loading delays caused by inclement weather. Port maintenance can also disrupt exports for several days.

All figures exclude loads identified as KEBCO grade from Kazakhstan. These are KazTransoil JSC shipments that cross Russia for export via the Baltic ports of Ust-Luga and Novorossiysk.

The Kazakh casks are blended with Russian-origin crude oil to achieve uniform export quality. Since Russia invaded Ukraine, Kazakhstan has renamed its cargoes to distinguish them from those of Russian companies. Transit crude oil is specifically exempt from European Union sanctions.

Average four-week deliveries to Russia’s Asian customers and those on ships with no final destination fell to 3.07 million barrels a day in the period ended June 25, from 3.32 million barrels a day in the four weeks ended June 18. That’s the lowest reading since March.

While cargo volumes en route to India appear to have declined from recent highs, history shows that most cargo on ships with no original destination ultimately ends up there or in China.

The equivalent of 358,000 barrels per day was on vessels that either had destinations such as Port Said or Suez in Egypt, or that had already been, or are expected to be, transferred from one vessel to another off the South Korean port of Yeosu. These voyages typically terminate in ports in India or China and are shown as “Unknown Asia” in the table below until a final destination becomes clear.

The “Other Unknowns” volumes, totaling 164,000 barrels per day for the four weeks ended June 18, are tankers with no clear destination. Most of these cargoes come from Russia’s western ports and pass through the Suez Canal. However, some could end up in Turkey, while other cargoes are transhipped from one ship to another, either in the Mediterranean or, more recently, in the Atlantic Ocean.

Russia’s seaborne crude oil exports to European countries were unchanged at 104,000 barrels per day in the 28 days ended June 25, with Bulgaria as the only destination. Deliveries to Turkey are not included in these figures.

A market that used about 1.5 million barrels a day of crude oil for short-haul shipping by sea from export terminals in the Baltic, Black Sea and Arctic has been almost entirely lost, being replaced by far more expensive long-haul destinations in Asia, and time-consuming too serve.

In the four weeks ended June 25, no Russian crude was shipped to northern European countries.

Exports to Turkey, Russia’s only remaining Mediterranean customer, fell slightly to 209,000 barrels a day in the four weeks ended June 25, the lowest four-week average in six weeks; Inflows into the country had exceeded 425,000 barrels per day in October.

Flows into Bulgaria, Russia’s only Black Sea crude oil market, were unchanged at 104,000 barrels per day.

Rivers by export destination

In the seven days ended June 25, total Russian crude oil flows fell to 2.55 million barrels a day from 3.53 million barrels a day the previous week. Shipments fell from all four export regions, with the largest declines in the Baltic and Pacific ports.

Shipments from Primorsk fell 521,000 barrels per day, or 56%, compared to the previous week. Flows from Kozmino fell 314,000 barrels per day on a weekly basis.

The figures do not include the quantities from Ust-Luga and Novorossiysk, which were identified as Kazakhstan’s KEBCO quality.

export earnings

Flows into the Kremlin’s war chest from its crude oil export tariffs fell to $39 million in the seven days ended June 25, down $15 million, or 28%. Median four-week earnings fell $2 million to $52 million.

President Vladimir Putin instructed his government to refine existing indicators and introduce additional indicators to calculate oil prices for tax purposes in order to narrow the discount to global crude prices. The Russian government calculates oil taxes using a discount to Brent, which sets the country’s floor price of crude oil for budgetary reasons. As in recent months, when Russian oil trades above this threshold, the Treasury uses the market price for tax calculations. As of July, the discount is currently set at $25/bbl, but this can now be capped.

The June tariff was set at $2.21 per barrel based on an average Ural price of $55.97, which was $23.90 per barrel over the period April 15-May 14 was under Brent. The July tariff is cut to $2.13 per barrel based on an average Ural price of $54.57, which was $20.89 per barrel below Brent over the period May 15-June 14.

Origin-to-site flows

The charts below show the number of ships leaving each export terminal and the destinations of crude oil cargoes from the four export regions.

A total of 24 tankers loaded 17.85 million barrels of Russian crude in the week ended June 25, ship tracking data and port agent reports show. That’s 6.87 million barrels down from the previous week and the lowest since December. Destinations are based on where the ships are signaling to at the time of writing, and some will almost certainly change as the voyage progresses. All figures exclude loads identified as KEBCO grade from Kazakhstan.

The total volume of vessels loading Russian crude from Baltic terminals fell to a six-month low of 938,000 barrels a day.

Shipments of Russian crude from Novorossiysk in the Black Sea fell to a five-week low of 500,000 barrels a day. A cargo of Kazakh crude oil was also loaded at the port during the week.

Arctic shipments gave up the previous week’s gains and fell to 286,000 barrels per day, with two Suezmax tankers leaving port in the week ended June 25th.

Eight tankers were loaded at Russia’s three Pacific export terminals, up from 10 the previous week. Crude oil shipped from the region fell to a six-month low of 824,000 barrels a day.

The bulk of the bulk en route to unknown destinations is Sokol cargo that has recently been transhipped to other ships at Yeosu or is currently being shipped from the De Kastri loading terminal to an area off the South Korean port. Most of them also end up in India.

Some Sokol cargoes are now being transhipped a second time in the waters off South Malaysia. A small number of ESPO shipments are also shifted from one vessel to another in the same area. All these cargoes have so far reached India.

In the week ending June 25, a cargo was loaded from the Sakhalin Island terminal.

–With support from Sherry Su.

© 2023 Bloomberg LP

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