(Bloomberg) -- Russian crude oil flows to international markets show little sign of ebbing even as Moscow’s threatened output cut stretches into a third month.
Four-week average seaborne shipments, which smooth out some of the volatility in weekly numbers, rose in the period to May 5 to the highest 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 hit a new high.
Moscow’s assertion that high exports by sea were offset by an unreported drop in piped flows to Europe doesn’t appear to stand up to scrutiny. While exports through the Druzhba pipeline to Europe have fallen, the drop happened in January and February, before the output cut. It was accompanied by a jump in seaborne exports, clearly visible in the four-week flows in the chart below. Crude cargoes on tankers continued to rise in March and April.
Several of Russia’s OPEC+ partners have joined it in making production cuts with effect from this month to try to stabilize oil markets. Moscow may have to work hard to convince them that it has actually implemented its own reduction.
A drop in weekly flows from Russia is a result of tanker scheduling at the Arctic port of Murmansk and Novorossiysk on the Black Sea. While only one tanker loaded last week at the Arctic terminal, another two have already taken on cargoes in the first three days of the current week. At Novorossiysk, weekly flows are always variable driven in part by the number of Kazakh cargoes loaded at the port. This volatility is reduced by looking at the four-week average flows, which give a clearer picture of trends in export volumes.
Russia’s crude has continued to flow to international markets since its troops invaded Ukraine in February 2022. But Moscow’s oil revenues have shrunk, falling in April to just a third of last year’s level, hit by sanctions and price caps on its exports. Budget proceeds from crude and petroleum products fell 67% to 496.9 billion rubles ($6.4 billion) last month, the Finance Ministry said on Thursday.
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 rose for a fourth week to reach a record 3.55 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 5 were up by 180,000 barrels a day to 3.63 million barrels a day, the highest since the start of 2022, when Bloomberg began tracking the flows in detail. More volatile weekly flows fell by about 460,000 barrels a day from the previous week in the seven days to May 5, dropping to 3.62 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.
Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination, rose to a new high of 3.37 million barrels a day in the period to May 5. That’s up by 124,000 barrels a day from the period to April 28.
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 665,000 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 495,000 barrels a day in the four weeks to May 5, 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. An increasing number are being transferred from one vessel to another in the Mediterranean, or more recently, in the Atlantic Ocean for onward journeys to Asia.
Russia’s seaborne crude exports to European countries rose to 83,000 barrels a day in the 28 days to May 5, 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 5.
Exports to Turkey, Russia’s only remaining Mediterranean customer, rose to a 10-week high of 177,000 barrels a day in the four weeks to May 5.
Flows to Bulgaria, now Russia’s only Black Sea market for crude, rose to 83,000 barrels a day, recovering the previous week’s loss.
Flows by Export Location
Aggregate flows of Russian crude fell to 3.62 million barrels a day in the seven days to May 5, led by drops in shipments from the Black Sea and the Arctic. The volumes leaving the Baltic and Pacific ports were unchanged from the previous week.
Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.
Inflows to the Kremlin's war chest from its crude-export duty fell by $6 million to $50 million in the seven days to May 5, while four-week average income rose by $3 million, also to $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 a decreasing discount to prevailing Brent prices, rather than assessments of Urals crude. Oil taxes will be based on a reference export price set $28 a barrel below Brent next month, with the discount falling 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 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 25.3 million barrels of Russian crude in the week to May 5, vessel-tracking data and port agent reports show. That’s down by 3.2 million barrels, or 11% 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 at 1.77 million barrels a day.
Shipments of Russian crude from Novorossiysk in the Black Sea tumbled, dropping to 459,000 barrels a day. One cargo of Kazakhstani crude was also loaded at the port during the week.
Arctic shipments halved to 143,000 barrels a day, with one Suezmax tanker loading in the week to May 5.
Flows from the Pacific were virtually unchanged, with 12 tankers loading at the region’s three export terminals in the week to May 5.
Seven cargoes of ESPO crude out of nine 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: Some figures for Black Sea exports in 1Q22 have been revised to exclude shipments from Ust-Luga of crude owned by Azerbaijan and Turkmenistan.
Note: The next update of this story will be published on Monday May 15.
©2023 Bloomberg L.P.
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