Seaborne exports fall to a six-week low with a 500,000 barrel a day production cut due to start in March
(Bloomberg) — Russia’s oil exports fell to a six-week low, reversing a previous trend and providing a sign of what’s to come as it prepares for a production cut of 500,000 barrels a day next month.Aggregate flows of Russian crude fell by 562,000 barrels a day, or 16%, in the seven days to Feb. 10, even as exports from its Baltic ports edged higher. Combined shipments from the Arctic and the Pacific were down by half a million barrels on a daily basis, while those from the Black Sea also slumped. The less volatile four-week average fell for the first time since early January. Moscow has been keen to portray its production cut, which Deputy Prime Minister Alexander Novak announced Friday, as retaliation for the Group of Seven price cap on its exports. However, it may also reflect the difficulty Russia faces in maintaining crude oil shipments to its four remaining customers — China, India, Turkey and Bulgaria. Falling revenues have prompted the Kremlin to propose changes to the way its crude prices are calculated for tax purposes.
The volume of crude on vessels heading to China and India — plus small flows to Turkey and the quantities on ships that haven’t yet shown a final destination — fell in the four-week period, to an average 3.07 million barrels a day. While that’s down slightly from the period to Feb. 3, it is still the second-highest amount observed since Bloomberg began tracking the shipments at the start of 2022.
Flows to China are little changed since before Russia invaded Ukraine almost a year ago. Historical patterns suggest that most of the cargoes currently identified as “Unknown Asia” or “Other Unknown” will end up in India.
Inflows to the Kremlin’s war-chest from crude-export duties have plunged since the start of the year. While lower shipments and an easing of crude prices have played a part in that drop, so too has a widening gap between global benchmark Brent and reported prices for Russia’s key Urals grade, which are used to calculate tax rates.
Worried by falling revenues, the Russian government has proposed switching from using Urals prices reported by Argus to setting a tax reference price as a discount to Brent. It is suggested that this will be $34 a barrel for April, narrowing to $25 a barrel by July.
The European Union’s import ban on Russian crude has led to much longer voyages for shipments, with journeys now taking an average of 31 days from Baltic ports to India, compared with just seven days from the same terminals to Rotterdam and about half that to Poland. That’s putting more pressure on the ships whose owners are willing to haul Russian cargoes. The country is increasingly reliant on its own ships and a so-called “shadow fleet” of usually older vessels owned by small, often unknown companies that have sprung up in recent months.
Russia appears to be trying to take some of the pressure off this fleet, sending additional volumes of crude by rail to its Pacific terminal at Kozmino. With the pipeline to the port already operating at capacity, expensive rail deliveries are the only way of boosting shipments.
There has also been a resurgence in ship-to-ship transfers of cargoes in the Mediterranean. This has been visible both off the Spanish north African city of Ceuta and off the Greek coast near Kalamata. At least 10 cargoes have been transferred between ships in those two locations. Twelve more Aframax tankers that have loaded in the Baltic since late January look likely to transfer their cargoes to other vessels in the Mediterranean, based on their destination signals.
Crude Flows by Destination:
On a four-week average basis, overall seaborne exports fell by 235,000 barrels a day to 3.204 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 the EU sanctions.
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Asia
Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination edged lower in the period to Feb. 10. 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 more than 655,000 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 almost 640,000 barrels a day in the four weeks to Feb. 10, 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 Turkey. An increasing number are being transferred from one vessel to another in the Mediterranean for onward journeys to Asia.
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Europe
Russia’s seaborne crude exports to European countries fell to 104,000 barrels a day in the 28 days to Feb. 10, with Bulgaria the sole European destination. These figures do not include shipments to Turkey.
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 Feb. 10.
Exports to Mediterranean countries slipped back to average 188,000 barrels a day in the four weeks to Feb. 10, giving up the previous week’s increase.
Turkey 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, Turkey has not emerged as a significant lifeline for Moscow since the EU import ban came into effect on Dec. 5.
Flows to Bulgaria, now Russia’s only Black Sea market for crude, fell for a second week, slipping to 104,000 barrels a day. That’s the lowest flow to Black Sea destinations since April and the smallest to Bulgaria since August. The country secured a partial exemption from the EU ban, which should support inflows now that the embargo has come into force.
Flows by Export Location
Aggregate flows of Russian crude fell below 3 million barrels a day for the first time in five weeks. A small increase in the flows from the Baltic was more than offset by declines from all other regions. 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 $23 million, or 46%, to $27 million in the seven days to Feb. 10. The four-week average income fell by $8 million to $46 million.
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, during the depths of the pandemic. The drop is the result of a decline in Urals prices over the measurement period, which ran from mid-December to mid-January. Russia’s benchmark grade averaged $46.82 a barrel according to ministry figures, a discount of almost $35 a barrel to Brent over the same period.
Russia’s government is trying to minimize the impact of lower Urals prices on the nation’s coffers amid the rising cost of the war in Ukraine. It has proposed switching from a published Urals price assessment to a fixed discount to Brent to calculate mineral extraction tax and profit-based tax. The discount will be set at $34 a barrel for April and will be reduced to $25 a barrel by July, according to amendments to tax law submitted to the State Duma, the lower house of Parliament.
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 27 tankers loaded 20 million barrels of Russian crude in the week to Feb. 10, vessel-tracking data and port agent reports show. That’s down by 3.9 million barrels, or 16%, from the previous week. 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 edged higher from the previous week.
Shipments from Novorossiysk in the Black Sea slumped slumped to an eight-week low in the period through Feb. 10, with just two ships taking on cargoes.
Arctic shipments fell from the previous week’s high, with just one Suezmax tanker leaving from Murmansk.
Flows from the Pacific gave up the previous week’s increase, dropping back to just over one million barrels a day.
The volumes heading to unknown destinations are all 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. Three tankers loaded at the terminal during the week, the most since shipments restarted in October.
Note: This story forms part of a regular weekly series tracking shipments of crude from Russian export terminals and the export duty revenues earned from them by the Russian government.
Note: All figures exclude cargoes owned by Kazakhstan’s KazTransOil JSC, which transit Russia and are shipped from Novorossiysk and Ust-Luga as KEBCO grade crude.
Note: Data on crude flows can also be found at {DSET CRUDEJ }. The numbers, which are generated by a bot, may differ from those in this story.
Note: Aggregate weekly seaborne flows from Russian ports in the Baltic, Black Sea, Arctic and Pacific can be found on the Bloomberg terminal by typing {ALLX CUR1 }.
–With assistance from Sherry Su.
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