Russian Oil Earnings Slide as Waning Prices Counter Higher Flows

(Bloomberg) —

A further slump in weekly average oil prices more than offset a small increase in flows from Russian ports, intensifying pressure on Moscow as it grapples with a weakening global market.

Four-week average crude volumes rose to 3.21 million barrels a day in the week to Sept. 15, up by 80,000 barrels a day compared with the previous period. Weekly flows, which are more volatile, also increased, rising by about 110,000 barrels a day.

But the price of Russia’s flagship Urals crude fell for a second week, dropping by more than $3 a barrel. That took the weekly average back below the $60-a-barrel threshold that the Group of Seven nations sought to impose on the Kremlin as punishment for the 2022 invasion of Ukraine. Falling prices and lower volumes have combined to drive down the value of Russia’s crude exports by almost 30% since the end of June.

Slowing economic growth in China — Russia’s biggest market — is pressuring the price of oil. Bearish forces are likely to weigh on global prices again after the US Federal Reserve’s meeting on Wednesday, with even a 50-basis-point cut in interest rates unlikely to support the market for long.

Refinery runs began to pick up in the week to Sept. 15. The Gazprom Neft-owned Moscow Oil Refinery resumed operations on Tuesday at a crude distillation unit that had been halted following a drone attack on Sept. 1. However, nationwide processing rates during the first 11 days of the month were about 164,000 barrels a day below the average level for most of August.

Crude Shipments

A total of 30 tankers loaded 22.72 million barrels of Russian crude in the week to Sept. 15, vessel-tracking data and port-agent reports show. The volume was up from 21.99 million barrels on 29 ships the previous week.

It means Russia’s seaborne daily crude flows in the week to Sept. 15 rose by about 110,000 barrels to 3.25 million.

The less volatile four-week average also rose, increasing by 80,000 barrels a day to 3.21 million from 3.13 million the previous week. Apart from one week when they dipped below 3 million barrels a day, shipments using this measure have ranged between 3.13 million and 3.25 million barrels a day since the beginning of July. 

Crude shipments so far this year are about 50,000 barrels a day below the average for the whole of 2023.

A four-day gap in the loading program for Primorsk, which showed no cargoes due to complete loading between Sept. 10 and 14, suggests that port or pipeline work halted shipments from the terminal for much of the week. 

No cargoes of Kazakhstan’s KEBCO crude were loaded during the week.

Russia terminated its export targets at the end of May, opting instead to restrict production, in line with its partners in the OPEC+ oil producers’ group. The country’s output target is set at 8.978 million barrels a day until the end of November, after a planned easing of some output cuts was delayed by two months.

Moscow has also pledged to make deeper output cuts in October and November this year, then between March and September of 2025, to compensate for pumping above its OPEC+ quota earlier this year.

Russian data show the nation got very close to meeting its OPEC+ crude-output target last month, following a push from the group to improve adherence to its supply deal.

Export Value

The gross value of Russia’s crude exports fell to $1.42 billion in the seven days to Sept. 15, from $1.44 billion in the period to Sept. 8. The small increase in weekly flows was more than offset by another drop in prices for Russia’s major crude streams.

Export values at Baltic ports were down week-on-week by about $3.40 a barrel, while shipments from the Black Sea fell by about $3.30 a barrel. Prices for key Pacific grade ESPO held up better, losing about $2.70 compared with the previous week. Delivered prices in India were also down, falling by about $3.40 a barrel, all according to numbers from Argus Media.

Urals crude shipped from Russia’s Baltic ports traded at an average $59.46 last week, Argus Media data showed. Prices for shipments from the Black Sea were only about 35 cents higher.

Four-week average income remained at its lowest since February, edging lower to about $1.5 billion a week. The four-week average peak of $2.17 billion a week was reached in the period to June 19, 2022.

During the first four weeks after the Group of Seven nations’ price cap on Russian crude exports came into effect in early December 2022, the value of seaborne flows fell to a low of $930 million a week, but soon recovered.

Flows by Destination

• Asia

Observed shipments to Russia’s Asian customers, including those showing no final destination, rose to 3.03 million barrels a day in the four weeks to Sept. 15. That’s about 7% below the average level seen in April.

About 1.33 million barrels a day of crude was loaded onto tankers heading to China. The Asian nation’s seaborne imports are boosted by about 800,000 barrels a day of crude delivered from Russia by pipeline, either directly, or via Kazakhstan. 

Flows on ships signaling destinations in India averaged 1.6 million barrels a day, down from a revised 1.64 million for the period to Sept. 8.

Both the Chinese and Indian figures are likely to rise as the discharge ports become clear for vessels that are not currently showing final destinations.

The equivalent of about 100,000 barrels a day was on vessels signaling Port Said or Suez in Egypt. Those voyages typically end at ports in India or China and show up as “Unknown Asia” until a final destination becomes apparent.

Russia’s oil flows continue to be complicated by the Greek navy carrying out exercises in an area that’s become associated with the transfer of Russian crude. These naval drills have been extended again and are now due to run until mid-November — more than six months after they first started. As a result, recent cargo switches have moved to the waters off Egypt’s Port Said, the Gulf of Oman off the port of Sohar and, most recently, at the Omani port of Duqm.

• Europe and Turkey

Russia’s seaborne crude exports to European countries have ceased, with flows to Bulgaria halted at the end of last year. Moscow also lost about 500,000 barrels a day of pipeline exports to Poland and Germany at the start of 2023, when those countries stopped purchases.

Turkey is now the only short-haul market for shipments from Russia’s western ports, with flows in the 28 days to Sept. 15 edged lower to about 180,000 barrels a day.

© 2024 Bloomberg L.P.