The volume leaving Russia on tankers has risen by 10% since early April
(Bloomberg) — Russian crude oil flows to international markets continue to rise, even as the country insists it is slashing production.
Four-week average seaborne shipments, which smooth out some of the volatility in weekly numbers, rose again in the period to May 12, as they have in four of the past five weeks. Flows are now up by 10% since the first week of April and hit a new high for the period since Bloomberg began tracking them in detail at the start of 2022. With almost all Russia’s crude going to China and India, volumes to Asia also reached a new peak.
Russia’s Energy Ministry said that the nation’s oil-output cuts — retaliation for Western sanctions — almost reached the targeted level in April, having previously said they exceeded the target in March. First Deputy Energy Minister Pavel Sorokin pointed to lower pipeline flows to Europe and reduced refinery runs.
But Russian data show that pipeline flows fell sharply before the cuts came into effect and were almost unchanged between February and March. Refinery runs dropped by 1.4% between March and April and fell further in the first 10 days of May, as some plants underwent normal seasonal maintenance. Processing rates have fallen by 300,000 barrels a day since March, but remain 430,000 barrels a day above the levels seen in April and May last year.
Russian cargoes are again being transferred from the smaller ships used at its ports onto the largest crude carriers in the Atlantic Ocean for onward journeys to Asia. During the winter months, these cargo switches were carried out in the relatively sheltered waters of the Mediterranean, off the north coast of Morocco close to the Spanish exclave of Ceuta. But more recently the transfers have moved to the waters between the Canary Islands and the Azores.
Two tankers that loaded in the Baltic in recent weeks are heading towards the Azores, where they are expected to transfer their cargoes into a VLCC for onward transport to China. They will follow at least four other cargo switches in the area in the past month.The aging fleet of tankers used to keep Russia’s crude flowing since its troops invaded Ukraine in February 2022, many of them with uncertain ownership and unclear insurance, is stoking concerns about maritime safety. The emergence of secretive new trading companies also raises questions about who is ultimately benefitting from the wide difference between export prices for Russian crude and those paid by importers.
Russia’s Lifelines
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 edged higher to reach a record 3.61 million barrels a day in the latest four-week period, the highest since Bloomberg began tracking the flows in detail at the start of 2022.
As the ultimate destinations of cargoes loading in late January became apparent, flows to China rose to new post-invasion highs, and remained close to those levels in February and the first weeks of March. 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, while those loaded onto very large crude carriers off the north coast of Morocco or, more recently, in the Atlantic Ocean, will head to China.
Crude Flows by Destination
On a four-week average basis, overall seaborne exports in the period to May 12 were up by 80,000 barrels a day to 3.72 million barrels a day, the highest since the start of 2022, when Bloomberg began tracking the flows in detail. More volatile weekly flows rose by about 120,000 barrels a day from the previous week, reaching 3.76 million barrels a day.
Weekly data are affected by the scheduling of tankers and loading delays caused by bad weather. Port maintenance can also disrupt exports for several days at a time.
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.
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Asia
Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination, rose to 3.41 million barrels a day in the period to May 12.
While the volumes heading to China and India appear to have declined from recent highs, history shows that most of the cargoes on ships without an initial destination eventually end up in one or other of those countries.
The equivalent of 593,000 barrels a day 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. Those voyages typically end at ports in India or China and show up in the chart below as “Unknown Asia” until a final destination becomes apparent.
The “Other Unknown” volumes, running at 334,000 barrels a day in the four weeks to May 12, are those 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. Some cargoes are being transferred from one vessel to another.
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Europe
Russia’s seaborne crude exports to European countries were unchanged at 83,000 barrels a day in the 28 days to May 12, with Bulgaria the sole 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 May 12.
Exports to Turkey, Russia’s only remaining Mediterranean customer, continued to rise, reaching 203,000 barrels a day in the four weeks to May 12, their highest since February.
Flows to Bulgaria, now Russia’s only Black Sea market for crude, were unchanged at 83,000 barrels a day.
Flows by Export Location
Aggregate flows of Russian crude rose to 3.76 million barrels a day in the seven days to May 12, led by increases in shipments from the Black Sea and the Arctic. The volumes leaving the Baltic ports were unchanged from the previous week, while the Pacific region was the only one to show a drop.
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 rose by $1 million to $51 million in the seven days to May 12, while four-week average income was virtually unchanged at $50 million.
President Vladimir Putin has signed into law a second amendment to the way Russia’s oil price is assessed for tax purposes. From June, rates of export duty will be calculated in the same way as those for mineral extraction tax and profit-based tax on oil companies, using either the actual Urals price during the monitoring period, or a discounted Brent price. The maximum discount was set $28 a barrel below Brent for June, narrowing to $25 in July and remaining at that level until the end of the year.
The duty rate for May is $1.96 a barrel, based on a Urals price of $51.15 a barrel between March 15 and April 14. The rate for June has been set at $2.21 a barrel, based on an average Urals price of $55.97, which was $23.90 a barrel below Brent during the period between April 15 and May 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 34 tankers loaded 26.3 million barrels of Russian crude in the week to May 12, vessel-tracking data and port agent reports show. That’s up by 830,000 barrels, or 3% 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 was unchanged, running at 1.77 million barrels a day for a third week.
Shipments of Russian crude from Novorossiysk in the Black Sea recovered to 625,000 barrels a day. One cargo of Kazakhstani crude was also loaded at the port during the week.
Arctic shipments jumped to a six-week high of 429,000 barrels a day, with three Suezmax tankers loading in the week to May 12.
Russia’s Pacific was the only region to show a drop in shipments in the week to May 12. Nine tankers loaded at the three export terminals there, down from 12 the previous week.
Four out of six ESPO cargoes loaded during the week are on vessels heading to China. The other two are heading to India.
The volumes heading to unknown destinations are mostly Sokol cargoes that recently have 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. Most of these are also ending up in India.
Some Sokol cargoes are now being transferred a second time in the waters off southern Malaysia. A small number of ESPO shipments are also being moved from one vessel to another in the same area. All of these cargoes have, so far, gone on to India.
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: The next update of this story will be published on Monday May 22.
–With assistance from Sherry Su.
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