Minimal Increase in Russian Oil Revenue Fails to Reverse Declining Trend

Russia's oil exports rose slightly last week, but not enough to prevent what appears to be a downward trend in the nation's shipments to a reduced group of buyers.

Russian crude oil shipments rose by 197,000 barrels a day in the seven days to January 6, an increase of 8%. Shipments from the Pacific region were up by 200,000 barrels a day from the previous week, while those from the Arctic region rose by 143,000 barrels a day. This offset a decline in volumes leaving the Black Sea.

Despite an increase in exports, Russia's four-week average continues to decline, indicating that the country is struggling to find new buyers since Europe halted purchases last month. This could spell trouble for Russia, which is heavily reliant on oil exports.

The volume of crude oil on vessels heading to China, India and Turkey fell for the fourth straight time in the four weeks to January 6, averaging 2.31 million barrels per day. This is a decrease of 140,000 barrels per day from the previous four-week period, and the lowest level in 10 weeks.

The average crude shipment from Russia over a four-week period is as follows:

The slump in flows to Turkey was particularly dramatic, with most of the ships yet to show destinations likely to end up in India or China. Imports from Russia, which rose to almost 400,000 barrels a day in September, slumped to just 21,000 barrels a day over the past four weeks, vessel-tracking data monitored by Bloomberg show. That's even lower than they were before Moscow's troops invaded Ukraine last February.

Inflows to the Kremlin's war-chest from crude export duties have decreased significantly. While lower flows and easing crude prices have contributed to this, a change in the formula used to calculate duty rates has also played a role. This is part of the country's ongoing shift away from taxing exports and instead increasing the burden on production.

Russia is one of the world's leading suppliers of crude oil, and its seaborne shipments play a vital role in global energy markets. Russia has a large and sophisticated fleet of oil tankers that helps to ensure the reliable delivery of its crude exports.

Since the European Union has banned imports of Russian crude oil, shipments to India from Baltic ports have taken much longer, averaging 31 days. This is compared to the 7 days it used to take to get to Rotterdam, and half that time to Poland. This puts more strain on the already limited number of ships and their owners who are willing to transport Russian cargo.

As the country becomes more reliant on its own ships, a "shadow fleet" of older ships owned by small, often unknown companies has emerged in recent months. Although European-owned tankers can still transport Russian crude as long as it is sold below a $60 per barrel cap (introduced at the same time as the import ban), few are currently doing so.

There has been a resurgence in ship-to-ship transfers of cargoes in the Mediterranean, with cargoes either being combined onto larger vessels or shifted from ice-class tankers onto other vessels. This has been visible both off the Spanish north African city of Ceuta and off the Greek coast near Kalamata.

Shuttle tankers that haul Russia's Sokol crude are facing longer than usual wait times to transfer cargoes to other ships off the South Korean port of Yeosu. This is reducing the number of cargoes they are able to lift each month. Tankers hauling Russian crude are becoming more cautious about their final destinations. Vessels carrying almost 25 million barrels of Russian crude - the equivalent of 880,000 barrels a day of exports - left port with no clear final destination in the four weeks to Jan. 6. It's likely that many of these vessels, after passing through the Suez Canal, will begin to signal Indian ports.

Overall seaborne exports have fallen by an average of 159,000 barrels per day over the past four weeks. This is the lowest level since Bloomberg began tracking Russian crude exports in detail at the beginning of last year. Shipments to Europe have all but dried up, while those to Asia have also declined. Even with the halt in pipeline supplies to Germany from the beginning of the year, exports have still fallen. This has freed up as much as 300,000 barrels per day more crude for delivery to coastal export terminals.

The average crude shipment from Russia over a four-week period is as follows:

‍All figures exclude cargoes identified as Kazakhstan's KEBCO grade. These are shipments made by KazTransoil JSC that transit Russia for export through Ust-Luga and Novorossiysk.

Kazakh barrels are blended with crude of Russian origin to create a uniform export grade. However, since the invasion of Ukraine by Russia, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies. Transit crude is specifically exempted from the EU sanctions.

The average number of shipments to Russia's Asian customers fell for a second week in the period to Jan. 6. This includes cargoes destined for India and China. It appears that the volume heading to India has slumped, but history shows that most of the cargoes on ships initially showing no final destination end up there.

More than 480,000 barrels of oil equivalent are on vessels headed for Port Said or Suez, 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 are shown on the chart below as “Unknown Asia” until a final destination becomes apparent.

The "Unknown" volumes of oil, totaling almost 400,000 barrels per day, are those on tankers that either have no destination listed or are headed for Gibraltar or Malta. Most of these cargoes eventually pass through the Suez Canal, but some may end up in Turkey. An increasing number of these oil shipments are being transferred from one vessel to another in the Mediterranean, en route to Asia.

The four-week moving average of crude shipments from all Russian ports has increased in recent months. This is due to the fact that Russia has been ramping up its crude production in order to meet global demand.

Russia's seaborne crude exports to European countries fell to 146,000 barrels a day in the 28 days to Jan. 6, 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 has been lost almost completely, to be replaced by long-haul destinations in Asia that are much more costly and time-consuming to serve.

The average crude shipment from Russia to Europe takes four weeks.

No Russian crude was shipped to northern European countries in the four weeks to Jan. 6. This is the first time since November 2016 that no Russian crude has been shipped to this region.

The average crude shipment from Russia to northern Europe takes four weeks.

Exports to Mediterranean countries continued to fall last week, setting a new post-invasion low. Flows to the region have been falling for nine weeks now.

Turkey was once the only destination for Russian seaborne crude into the Mediterranean, but those flows are now dwindling. Turkey was one of the countries that boosted imports after Moscow’s troops invaded Ukraine, but it is surprising to see flows falling so fast now. Turkey is not a party to the EU’s import ban and had been seen as a key market for the country’s crude after European buyers shunned Russian crude.

The average number of shipments to Mediterranean destinations over a four-week period.

Flows of crude oil to Bulgaria, Russia's only Black Sea market, fell for a second week, slipping to 146,000 barrels a day. Bulgaria secured a partial exemption from the EU ban on oil exports, which should support inflows now that the embargo has come into force.

The average flow of goods to Black Sea destinations over a four-week period was steady, with no significant changes noted.

Russian crude oil shipments rose by 197,000 barrels per day, or 8%, in the seven days to January 6. Increases in Pacific and Arctic shipments were partly offset by a decline in volumes leaving the Black Sea, which were down by 146,000 barrels per day. Shipments from the Baltic were unchanged from the previous week.

Figures for Russian crude oil exports do not include volumes from Ust-Luga and Novorossiysk that are classified as Kazakhstan's KEBCO grade.

Russia is one of the world's leading crude oil exporters, with shipments originating from a number of different ports. The majority of Russia's seaborne crude oil exports come from the Black Sea port of Novorossiysk, followed by the Baltic Sea port of Primorsk. Other important export ports include Vladivostok, Nakhodka, and Murmansk.

The Kremlin's war chest saw a big drop in inflows from crude-export duty in the seven days to Jan. 6, with a 48% decrease to $57 million. This is due to a change in the way duty is calculated that came into effect at the start of January, resulting in a four-week average income of $88 million.

The Kremlin's revenue from export duty on Russia's crude shipments has been declining in recent years.

The January duty rate for oil exports from Russia is $2.28 per barrel, based on an average price of $57.5 per barrel for the Urals crude oil blend. This is a decrease from the rate of $5.91 per barrel in December, due in part to a change in the formula used to calculate duty rates for 2023. Under the new formula, the burden of taxation is shifted from exports to production, as part of the Russian government's multi-year tax maneuver. The plan is to phase out export duties entirely by the start of 2024.

The charts below show the number of ships leaving each export terminal and the destinations of crude cargoes from the four export regions.

A total of 26 tankers loaded 19.7 million barrels of Russian crude in the week to Jan. 6, according to vessel-tracking data and port agent reports. That's up by 1.3 million barrels, or 8%, 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.

A total of 26 tankers loaded with Russian crude oil were reported in the week ending January 6.

The volume of Russian crude being loaded at Baltic terminals remained unchanged from the previous week, but was still about 300,000 barrels per day lower than the levels seen earlier in 2022.

Every week, crude oil flows from Primorsk and Ust-Luga. This oil is then transported to refineries, where it is processed into various petroleum products.

Shipments from Novorossiysk in the Black Sea declined after two weeks of increases. Nearly half of the volume lifted is on tankers that have not yet signaled a destination.

Novorossiysk is a major crude oil export terminal in Russia, and every week, a large volume of crude oil is shipped out from the terminal. This crude oil is then transported to various destinations around the world.

Arctic shipments increased to their highest level in two months, with three suezmax tankers leaving from Murmansk during the week. All of the tankers are heading to Asia via the Suez Canal.

Every week, crude oil is shipped from Murmansk to destinations around the world. This oil is vital to many industries and helps to keep the global economy moving.

Flows of crude oil from the Pacific region rose to a four-week high in the first week of 2023, with shipments of Sokol crude resuming after a brief hiatus. This uptick in activity is a positive sign for the oil market, which has been struggling in recent months.

Sokol cargoes are transferred to other ships in an area off the South Korean port of Yeosu. Shuttle tankers are now often waiting for several days before transfers take place, reducing the number of cargoes they can load. These cargoes are the ones with unknown destinations, with all recent ones eventually heading to India or China.

Each week, crude oil is shipped from Kozmino, De Kastri and Sakhalin Island. This oil is then used to produce a variety of products, including gasoline, diesel and other fuels.