Russia’s Crude Exports By Sea Slide as Lucrative Pacific Trade Declines

By Julian Lee (Bloomberg) —

Russia’s seaborne crude exports fell back sharply from the previous weeks’ highs, with Moscow unable to maintain record flows from the country’s Pacific ports.

Overall seaborne shipments shrank to 3.11 million barrels a day in the seven days through Friday, a 14% week-on-week decline. The less-volatile four-week average also retreated.

Though of a similar size, the decline is unlikely to be related to a 500,000-barrel-a-day production cut for this month that the Kremlin announced in response to Western embargoes and price caps. Any imposed reduction in flows is most likely to be seen at the country’s western ports, where cargoes are being sold at a 25% discount to those shipped from the Pacific. But flows from Baltic and Black Sea ports were unchanged from the previous week.

Strong winds at Kozmino around the end of February may have hampered berthing operations at the Pacific port, reducing the number of vessels that could be loaded in the week.

The volume of crude on vessels heading to China and India — plus smaller flows to Turkiye and the quantities on ships that haven’t yet shown a final destination — slipped in the four-week period, to an average 3.17 million barrels a day.

As the ultimate destinations of cargoes loading in late January become apparent, flows to China rose to new post-invasion highs. Historical patterns suggest that most of the cargoes currently identified as “Unknown Asia” and heading for the Suez Canal will end up in India.

Ship-to-ship transfers of cargoes in the Mediterranean continue apace. This has been most visible off the Spanish north African city of Ceuta and off the Greek coast near Kalamata. At least 37 cargoes have been transferred between ships in those two locations since the start of the year. The volume transferred off the coast of Greece, mostly in the Bay of Lakonikos, soared in February, rising to more than 10 million barrels, equivalent to 360,000 barrels a day. That compares with 4.4 million barrels, equivalent to 156,000 barrels a day transferred off Ceuta. 

Russian crude cargoes are also going into overseas storage tanks. One cargo was discharged into tanks at the Dortyol oil storage terminal in southeast Turkey, while another vessel holding Russian crude is anchored at Tema in Ghana, where it is waiting to discharge its cargo.

Crude Flows by Destination

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

All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. Those are shipments made by KazTransoil JSC that transit Russia for export through the Baltic ports of Ust-Luga and Novorossiysk.

The Kazakh barrels are blended with crude of Russian origin to create a uniform export grade. Since Russia’s invasion of Ukraine, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies. Transit crude is specifically exempted from European Union sanctions.

• Asia

Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination edged higher in the period to March 3, rising to 3.1 million barrels a day from a revised 3.09 million barrels a day in the period to Feb. 24. That’s their highest since Bloomberg began tracking the flows at the start of 2022.

While the volume heading to India appears to have slumped, history shows that most of the cargoes on ships without an initial destination eventually end up there.

The equivalent of 727,000 barrels a day was on vessels showing destinations as either Port Said or Suez in Egypt, or which have already been or are expected to be transferred from one ship to another off the South Korean port of Yeosu. Those voyages typically end at ports in India and show up in the chart below as “Unknown Asia” until a final destination becomes apparent.

The “Other Unknown” volumes, running at 626,000 barrels a day in the four weeks to March 3, are those on tankers showing a destination of Gibraltar, Malta or no destination at all. Most of those cargoes go on to transit the Suez Canal, but some could end up in Turkiye. An increasing number are being transferred from one vessel to another in the Mediterranean for onward journeys to Asia.

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

• Europe

Russia’s seaborne crude exports to European countries fell back to 83,000 barrels a day in the 28 days to March 3, with Bulgaria the sole European destination. These figures do not include shipments to Turkiye.

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

No Russian crude was shipped to northern European countries in the four weeks to March 3.

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

Turkiye was the only destination for Russian seaborne crude into the Mediterranean, but flows there are just a fraction of the highs they reached in September and October. Despite not being a part of European sanctions on Russian crude exports, Turkiye has not remained a significant lifeline for Moscow since the EU import ban came into effect on Dec. 5. The Star refinery near Aliaga, owned by Azerbaijan’s Socar, is cutting down purchases of Russian crude, with flows to the plants averaging about 50,000 barrels a day in January and February, compared with an average of about 180,000 barrels a day, from August to October..

Flows to Bulgaria, now Russia’s only Black Sea market for crude, fell to their lowest since April, retreating to 83,000 barrels a day. Despite Bulgaria securing a partial exemption from the EU’s import ban, which allows it to continue importing Russian crude by sea, none headed to the port of Burgas in the week to March 3. Lukoil PJSC could begin using non-Russian crude in its refinery there as soon as March, according to a statement from the cabinet in Sofia.

Flows by Export Location

Aggregate flows of Russian crude fell to a three-week low of 3.11 million barrels a day in the week to March 3. A slump in exports from Pacific terminals was only partly offset by an increase in flows from the Arctic. Shipments  from Russia’s Baltic and Black Sea terminals were unchanged from the previous week.

Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.

Export Revenue

Inflows to the Kremlin’s war chest from its crude-export duty fell by $6 million to $38 million in the seven days to March 3, while four-week average income fell by $3 million to $40 million.

Putin signed into law amendments to the way Russia’s oil price is assessed for tax purposes. From April, rates of mineral extraction tax and profit-based tax on oil companies will be calculated using a decreasing discount to prevailing Brent prices, rather than assessments of Urals crude. Export duty, which will be phased out at the end of 2023, will not be affected by the change.

February’s duty rate is set at $1.75 a barrel. That’s down by 23% from January and the lowest per-barrel rate since June 2020. The duty rate for March has been set at $1.94 a barrel, the first increase since December, and is based on a Urals price of $50.51 a barrel during the assessment period that ran from Jan. 15 to Feb. 14.

Origin-to-Location Flows

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

A total of 29 tankers loaded 21.7 million barrels of Russian crude in the week to March 3, vessel-tracking data and port agent reports show. That’s down by 3.7 million barrels, or 14%, from the previous week and the lowest volume in three weeks. Destinations are based on where vessels signal they are heading at the time of writing, and some will almost certainly change as voyages progress. All figures exclude cargoes identified as Kazakhstan’s KEBCO grade.

The total volume on ships loading Russian crude from Baltic terminals was unchanged for a second week at 1.67 million barrels a day.

Shipments from Novorossiysk in the Black Sea were also unchanged, with only two vessels taking on Russian cargoes for a second week. 

Arctic shipments regained most of  the previous week’s loss, with two Suezmax and one Aframax tanker loading in the week to March 3.

Flows from the Pacific slumped to their lowest in 11 weeks after the previous week’s high. Eight tankers loaded at the region’s three export terminals in the week to March 3, down from a record 14 the previous week.

The volumes heading to unknown destinations are mostly Sokol cargoes that have recently been transferred to other vessels at Yeosu, or are currently being shuttled to an area off the South Korean port from the loading terminal at De Kastri.

–With assistance from Sherry Su.

© 2023 Bloomberg L.P.