(Bloomberg) -- Russia’s seaborne crude flows soared to an eight-week high ahead of a planned easing of an export cut Moscow began to implement in June.
Average nationwide shipments in the week to Aug. 27 rose to 3.4 million barrels a day, tanker-tracking data compiled by Bloomberg show. That’s a jump of about 880,000 barrels a day from the previous week, with the biggest increases seen at the Baltic ports of Primorsk and Ust-Luga. Flows from Novorossiysk on the Black Sea also recovered after the previous week’s storms. Less volatile four-week average numbers increased by a modest 40,000 barrels a day.
It’s too soon to be sure how sustained the increase will be because weekly data can be volatile. The jump in crude flows comes as shipments of refined fuels are set to slump to a 15-month low, amid strong domestic demand for road fuels and as some products exceeded Group of Seven price caps.
Despite last week’s jump, the figures support the notion that Moscow is now honoring a pledge to keep supply off the global market alongside its allies in the OPEC+ producer coalition. Russia initially said it would cut oil production in retaliation for Western sanctions and price caps on its oil imposed after the invasion of Ukraine, using February 2023 figures as a baseline.
But Moscow’s initial commitment to cut production by 500,000 barrels a day in March had no immediate effect on exports. Flows from western ports actually rose, peaking in late May. A subsequent reduction came after fellow OPEC+ oil producer Saudi Arabia made and then extended its own unilateral output cut, putting pressure on Russia to implement its own reduction.
Moscow eventually followed through on its pledge, with flows from western ports now down by about 420,000 barrels a day from their average February level.
Output cuts by several major oil producers in the OPEC+ group have boosted global oil prices and narrowed the discounts for Russian grades against global benchmarks, boosting oil the Kremlin’s revenues. Prices for Russia’s Urals crude rose above the $60 a barrel cap imposed by Group of Seven countries, above which cargoes cannot be carried on Western vessels or use services such as financing or insurance provided by Western firms.
Russia will extend its export cut into September, Deputy Prime Minister Alexander Novak said earlier this month, following a similar announcement from Saudi Arabia. However, the size of the supply reduction will be tapered to 300,000 barrels a day, from 500,000 barrels a day in August. Russia has given no baseline from which the export cut is to be measured.
The latest drop in overseas flows comes as Russia’s oil refineries increased crude-processing rates in the first half of August — before a sharp cut to state subsidies that’s about to take effect in September. The rise also comes ahead of the next maintenance season, with several refineries due to start work this month.
Flows by Destination
Russia’s seaborne crude flows appear to have plateaued at a level just below 3 million barrels a day on a four-week average basis. That’s about 450,000 barrels a day below the average level seen in February.
With few buyers left in Europe, the impact is being felt in shipments to Asia. On a four-week average basis, overall seaborne exports to Asian countries — plus the volumes on ships showing no final destination — are now more than 1 million barrels a day lower than their mid-May peak, although flows to the region edged up in the most recent period.
All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. Those are shipments made by KazTransoil JSC that transit Russia for export through Novorossiysk and the Baltic port of Ust-Luga.
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.
Observed shipments to Russia’s Asian customers, including those showing no final destination, edged higher to 2.57 million barrels a day in the four weeks to Aug. 27, from 2.53 million barrels a day in the period to Aug. 20.
Most of the cargoes on ships without an initial destination eventually end up in India. Even so, the volumes heading to the country that has become the biggest buyer of Russia’s seaborne crude are down from their recent highs. Adding the “Unknown Asia” and “Other Unknown” volumes to the total for India gives a figure of 1.53 million barrels a day in the four weeks to Aug. 27, down from a high of 2.15 million barrels a day in the period to May 21, but up from 1.45 million barrels a day in the period to Aug. 20.
The equivalent of 296,000 barrels a day was on vessels signaling 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 137,000 barrels a day in the four weeks to Aug. 27, are those on tankers showing no clear destination. Most of those cargoes originate from Russia’s western ports and go on to transit the Suez Canal, but some could end up in Turkey. Others could be transferred from one vessel to another, either in the Mediterranean or, more recently, in the Atlantic Ocean.
Russia’s seaborne crude exports to European countries were unchanged at 125,000 barrels a day in the 28 days to Aug. 27, with Bulgaria the sole destination. These figures do not include shipments to Turkey.
A market that consumed about 1.5 million barrels a day of short-haul seaborne 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 Aug. 27.
Exports to Turkey, Russia’s only remaining Mediterranean customer, edged lower to about 156,000 barrels a day in the four weeks to Aug. 27. They had topped 425,000 barrels a day in October.
Flows to Bulgaria, now Russia’s only Black Sea market for crude, were unchanged at 125,000 barrels a day. That’s about twice as much as the country was importing at the lowest points between March and May.
Flows by Export Location
Aggregate flows of Russian crude jumped to 3.4 million barrels a day in the seven days to Aug. 27, up from 2.53 million barrels a day the previous week. The increase was spread across all regions, with shipments from the Baltic accounting for nearly half of the additional barrels.
Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.
Vessel-tracking data are cross-checked against port agent reports as well as flows and ship movements reported by other information providers including Kpler and Vortexa Ltd.
Inflows to the Kremlin's war chest from its crude-export duty jumped to $55 million in the seven days to Aug. 27, an increase of $14 million or 35%. Four-week average income rose to $47 million.
Russia’s government calculates oil taxes — including export duty — using a discount to global benchmark Brent, which sets the floor price for the nation’s crude for budget purposes. If Russian oil trades above that threshold, the Finance Ministry uses the market price for tax calculations, as has been the case in recent months. The discount used to calculate taxes including export duty is set at $25 a barrel for July and August, but will narrow to $20 a barrel from September.
The duty rate for August has been set at $2.31 a barrel, based on an average Urals price of $58.03 during the calculation period between June 15 and July 14. That was $18.02 a barrel below Brent during the same dates.
For September, the duty has been set at $2.92 a barrel, based on an average Urals price of $70.33 during the calculation period between July 15 and Aug. 14. That was $13.90 a barrel below Brent over the same period. September’s duty rate is the highest this year.
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 33 tankers loaded 123.8 million barrels of Russian crude in the week to Aug. 27, vessel-tracking data and port agent reports show. That’s up by 6.12 million barrels from the previous week’s figure and the most in eight weeks.
Shipments increased from all regions, with two-thirds of the increase coming from the Baltic ports of Primorsk and Ust-Luga.
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 the Baltic terminals jumped to an eight-week high of 1.36 million barrels a day. In addition, one cargo of Kazakh crude was loaded at Ust-Luga during the week. Shipments from the Baltic remain about 420,000 barrels a day down from the highs seen between April and June.
Shipments of Russian crude from Novorossiysk also rebounded, with three tankers loading Russian crude. Shipments were running back in line with the loading program for the port by the end of the week, having fallen behind during the previous seven days.
Two cargoes of Kazakh crude were also loaded at the port during the week.
Three Suezmax tankers and one Aframax completed loading cargoes at the Arctic port of Murmansk in the week to Aug. 27, boosting flows to a four-week high.
One tanker that loaded in the week to Aug. 27 is headed to Ghana, following another that loaded two weeks previously, that is now idling off the coast of neighboring Ivory Coast. A previous cargo, loaded at Novorossiysk in January, discharged in the West African nation after a six-week wait off the port of Tema.
Thirteen tankers loaded at Russia’s three Pacific export terminals, up by three from the previous week. The volume of crude shipped from the region rose to a five-week high of 1.21 million barrels a day.
Shipments from the Sakhalin Island terminal continue to be affected by maintenance at one of the Sakhalin 2 project’s oil production platforms. The work is set to run until September. One vessel completed loading a cargo of Sakhalin Blend crude from the terminal.
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 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 bar one of these cargoes have, so far, gone on to India. That one cargo was transferred three times before ending up in China.
Shipments of Sokol crude to India have picked up again after slumping to zero in June. Flows in July averaged about 140,000 barrels a day and at least four cargoes are heading there this month.
Note: This story forms part of a weekly series tracking shipments of crude from Russian export terminals and the export duty revenues earned from them by the Russian government. Weeks run from Monday to Sunday. The next update will be on Tuesday, Sep. 19.
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.
If you are reading this story on the Bloomberg terminal, click here for a link to a PDF file of four-week average flows from Russia to key destinations.
--With assistance from Sherry Su.
©2023 Bloomberg L.P.