Russia’s seaborne crude exports slip as lucrative Pacific trade declines Ship’s crew

By Julian Lee (Bloomberg) —

Russia’s seaborne crude oil exports fell sharply from previous weeks’ highs as Moscow was unable to sustain record flows from the country’s Pacific ports.

Total shipments at sea fell to 3.11 million barrels per day in the seven days through Friday, down 14% from the previous week. The less volatile four-week moving average also declined.

While the drop is similarly large, it’s unlikely to be related to 500,000 barrels per day production cut for this month, which the Kremlin announced in response to Western embargoes and price caps. Any imposed reduction in flows is most likely to be seen in the country’s western ports, where cargoes are sold at a price 25% discount to those shipped from the Pacific. But the flows from the Baltic and Black Sea ports remained unchanged from the previous week.

Strong winds in Kozmino towards the end of February may have hampered docking operations at the Pacific port and reduced the number of ships that could be loaded during the week.

Crude oil volumes on ships bound for China and India — plus smaller flows to Turkiye and volumes on ships that have not yet announced a final destination — fell to an average of 3.17 million barrels a day over the four weeks.

As the final destinations of the cargoes shipped in late January became apparent, flows into China soared to new post-invasion highs. Historical patterns suggest that most of the cargo currently identified as “Unknown Asia” heading for the Suez Canal will end up in India.

Ship-to-ship handling of cargo in the Mediterranean continues. This was most evident off the Spanish North African city of Ceuta and off the Greek coast near Kalamata. At least 37 cargoes have been transhipped between ships at these two locations since the beginning of the year. The volume is transferred off the coast of Greece mainly in the Bay of Lakonikos, skyrocketed in February, rising to more than 10 million barrels, equivalent to 360,000 barrels per day. This compares to 4.4 million barrels, equivalent to 156,000 barrels per day from Ceuta.

Russian crude oil cargoes are also transported overseas in storage tanks. One cargo was unloaded into tanks at the Dortyol oil storage terminal in south-eastern Turkey, while another ship contains Russian crude oil anchored in topic in Ghana waiting to unload its cargo.

Crude Oil Flows by Destination

Crude oil flows fell 526,000 barrels per day in the week ended March 3 from the previous week. On a four-week average, total seaborne exports fell by 80,000 barrels per day to 3.3 million barrels per day

All figures exclude loads identified as Kazakhstan’s KEBCO grade. These are deliveries from KazTransoil JSC passing through Russia for export through the Baltic ports of Ust-Luga and Novorossiysk.

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

Average four-week shipments to Russia’s Asian customers, as well as shipments on ships with no final destination, rose slightly in the period ended March 3, rising to 3.1 million barrels per day from a revised 3.09 million barrels per day in the period ended February 24 Day. That’s the highest level since Bloomberg began tracking flows in early 2022.

While volumes appear to have collapsed en route to India, history shows that most cargo on ships with no initial destination eventually ends up there.

The equivalent of 727,000 barrels per day was on ships bound for either Port Said or Suez in Egypt, or which 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 and are shown in the table below as “Unknown Asia” until a final destination becomes apparent.

The “Other Unknown” volumes, which ran at 626,000 barrels per day for the four weeks ended March 3, are from tankers that have a destination in Gibraltar, Malta or no destination at all. Most of these cargoes pass through the Suez Canal, but some may end up in Turkiye. More and more ships are being transshipped from one ship to another in the Mediterranean for onward voyages to Asia.

A rare shipment of Russian crude is en route to Sri Lanka. This is only the fifth since the invasion of Ukraine more than a year ago and the first since September.

Russia’s sea crude exports to European countries fell to 83,000 barrels a day in the 28 days ended March 3, with Bulgaria the only European destination. Deliveries to Turkiye are not included in these figures.

A market that consumed more than 1.5 million barrels a day of short-haul crude oil sourced from export terminals in the Baltic, Black Sea and Arctic has been almost completely lost, replaced by far more expensive long-haul destinations in Asia and time-consuming to serve .

In the four weeks ended March 3, no Russian crude was shipped to northern European countries.

Exports to Mediterranean countries fell to a seven-week low of 115,000 barrels a day in the four weeks ended March 3.

Turkiye was the only destination for Russian crude oil from the sea to the Mediterranean, but the rivers there are only a fraction of the highs they reached in September and October. Although Turkiye is not part of European sanctions on Russian crude oil exports, it has not remained a significant lifeline for Moscow since the EU import ban came into effect on December 5. The Star refinery near Aliaga, owned by Azerbaijani Socar, is reducing its purchases of Russian crude oil, with an average of about 50,000 barrels per day flowing to the plants in January and February, compared to an average of about 180,000 barrels per day from August to October.

Flows to Bulgaria, now Russia’s only Black Sea market for crude, fell to their lowest level since April, falling to 83,000 barrels a day. Although Bulgaria has received a partial exemption from the EU import ban that allows it to continue importing Russian crude oil by sea, none entered the port of Burgas in the week ending March 3. Lukoil PJSC could start using non-Russian crude oil in its refinery there as early as March, according to a cabinet statement in Sofia.

Rivers by export location

Total Russian crude oil inflows fell to a three-week low of 3.11 million barrels per day in the week ended March 3. A slump in exports from Pacific terminals was only partially offset by a surge in inflows from the Arctic. Deliveries from Russia’s Baltic and Black Sea terminals were unchanged from the previous week.

Figures exclude quantities from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO content.

export earnings

Flows into the Kremlin’s war chest from its crude oil export tariff fell $6 million to $38 million in the seven days ended March 3, while average four-week earnings fell $3 million to $40 million.

Putin has signed amendments to the law on the tax assessment of oil prices in Russia. Beginning in April, the mineral extraction tax and oil company profit tax rates will be calculated using a decreasing discount to prevailing Brent prices, rather than to Ural crude. The export tariff, which will expire at the end of 2023, is not affected by the change.

The February tariff is set at $1.75 per barrel. That’s down 23% from January and the lowest per barrel rate since June 2020. The March tariff was set at $1.94 per barrel, the first increase since December, and is based on an Ural price of 50.51 USD per barrel during the yearly assessment period of January 15th to February 14th.

origin-to-place flows

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

A total of 29 tankers loaded 21.7 million barrels of Russian crude in the week ended March 3, ship tracking data and port agent reports show. That’s 3.7 million barrels, or 14%, down from the previous week and the lowest volume in three weeks. 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 Kazakhstan’s KEBCO grade.

Total volume on ships loading Russian crude from Baltic terminals remained unchanged for a second week at 1.67 million barrels per day.

Deliveries from Novorossiysk in the Black Sea also remained unchanged, with only two ships taking on Russian cargo for a second week.

Arctic shipments recouped most of the previous week’s loss, with two Suezmax and one Aframax tankers loaded in the week ended March 3rd.

Flows from the Pacific fell to their lowest level in 11 weeks after last week’s high. Eight tankers were loaded at the region’s three export terminals in the week ended March 3, up from a record 14 the previous week.

The quantities en route to undisclosed destinations are mainly Sokol cargoes that have recently been transhipped to other ships at Yeosu or are currently being shipped from the loading terminal at De Kastri to an area outside the South Korean port.

–With support from Sherry Su.

© 2023 Bloomberg LP

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