Russian crude exports still growing

Notwithstanding sanctions and an announced cut in production levels, seaborne exports of Russian crude continued to grow in March, reports Bloomberg.

Shipments of crude were up by 1m barrels a day (bpd) to a new high of 4.13m bpd in the seven days to March 31st, according to tanker-tracking data compiled by Bloomberg. The four-week average rose to its highest since June 2022.

Russia had said that it would be reducing its output by 500,000 bpd from last month through to June 2023. That was in response to a G7/ EU $60 price cap on Russian sales. On Sunday April 2nd Russia extended the duration of the cut until the end of the year as part of a wider move by the OPEC+ producer group.

While pledges are all very well, there has been no evidence from the export figures that even the initial cut had been implemented.

The increase in seaborne flows seen at the start of the year probably reflects the diversion of crude previously delivered to Poland and Germany through the Druzhba pipeline. Flows to Germany halted at the end of 2022 and deliveries to Poland dropped to about 60,000 bpd under the country’s last remaining supply contract with a Russian company.

That move from pipeline to sea means an additional 500,000 bpd of Russian crude is now being exported through the country’s ports.

Over the most recent four-week period, Bloomberg noted that the combined volume of crude on vessels heading to China and India, plus smaller flows to Turkey and quantities on ships that haven’t yet shown a final destination, reached new high of 3.29m bpd.

Historical patterns suggest that most of the vessels currently identified as “Unknown Asia” destinations and heading for the Suez Canal will end up in India, said Bloomberg.

The increase in ship-to-ship transfers of cargoes in the Mediterranean continued, and were a matter of increasing concern. STS transfers have been most visible off the Spanish north African city of Ceuta and off the Greek coast near Kalamata. Bloomberg said that at least 55 cargoes hade 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, fell back in March to 6.4m barrels, equivalent to 208,000 bpd, from a revised 9.7m barrels in February. That compares with 5.8m barrels, equivalent to 188,000 bpd transferred off Ceuta, Bloomberg said.

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 EU sanctions.

The equivalent of 555,000 bpd was on vessels showing destinations as either Port Said or Suez in Egypt, or which already have been or are expected to be transferred from one ship to another off the South Korean port of Yeosu.

The “Other Unknown” volumes, running at 634,000 bpd in the four weeks to March 31st, were on tankers showing a destination of Ceuta, Kalamata or no destination at all. Most of those cargoes go on to transit the Suez Canal, but some could end up in Turkey, said Bloomberg.

Russia’s seaborne crude exports to European countries rose to 104,000 bpd in the 28 days to March 31st, with Bulgaria the sole destination. These figures do not include shipments to Turkey.

An indication in the change in logistics (and its implication for vessel demand) is that a market that consumed more than 1.5m bpd of short-haul crude, coming from export terminals in the Baltic, Black Sea and Arctic has almost completely vanished. It has been replaced by long-haul destinations in Asia. No Russian crude was shipped to northern European countries in the four weeks to March 31st.

Exports to Turkey rose to an average of 162,000 bpd in the four weeks to March 31st. Flows to Bulgaria rose to 104,000 bpd.

The aim of the price cap was to keep oil flowing but to reduce Russian income. While the flow of oil has certainly continued, albeit at longer distances, more often by sea, and to new destinations, the second half of the equation, to reduce Russia’s income, has been less successful.

According to Bloomberg, inflows to the Russian Treasury from its crude-export duty rose by $14m to an 11-week high of $56m in the seven days to March 31, while the four-week average income rose by $4m to a seven-week high of $47m.

A total of 38 tankers loaded 28.9m barrels of Russian crude in the week to March 31st, according to vessel-tracking data and port agent reports. That was a rise of 33% week on week (7.1m barrels). All figures exclude cargoes identified as Kazakhstan’s KEBCO grade.

While the volume on ships loading Russian crude from Baltic terminals rose to 1.77m bpd, shipments from Novorossiysk in the Black Sea fell to 540,000 bpd.