Russia's Oil Exports Soar Amid Pipeline Shutdown and Fuel Embargo

It looks like Russia's seaborne oil flows are on the rise.

There are two possible explanations for this: the nation is pushing more cargoes onto the water after Germany and Poland all but halted piped imports, and Moscow is keeping an eye on an impending ban on fuel purchases by the European Union.

Russia's crude exports rebounded in the seven days to Jan. 27, recovering most of the previous week's loss. Aggregate volumes rose by 480,000 barrels a day, or 16%, to 3.6 million in the week. Shipments from Baltic and Pacific ports were both up by 310,000 barrels a day from the previous week, with the increase partly offset by a decline in volumes from the Arctic.

Russia has already lost its key European market for crude and is about to do the same for refined products - an EU import ban is due to come into force on Feb. 5. Like the earlier embargo on crude, it will be accompanied by a price cap mechanism, intended to allow flows to continue to non-European buyers as long as cargoes are purchased below yet-to-be agreed prices. Some analysts question whether Russia will be able to find buyers for the fuel cargoes Europe doesn't take, creating questions about where that would leave the nation's refining industry.

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.

The increase in crude flows from Russia over the past week has driven up the country's four-week average, which smooths out peaks and troughs in the data. This is due to the timing of individual shipments and factors like weather conditions and port activity. By that measure, seaborne flows from Russia are the highest since June. However, the increase in export duties has only brought in an additional $8 million in revenue for the Kremlin, meaning that the burden of taxes on Russian oil is shifting from exports to production.

Although Russian oil companies have been able to sell crude oil to new customers in India, it is not clear whether they will be able to sell refined products to markets that are already supplied by their own refineries.

Tankers carrying Russian crude are becoming more secretive about their final destinations. In the four weeks to Jan. 27, vessels carrying more than 33 million barrels of Russian crude left port without showing a clear final destination. This is the equivalent of 1.19 million barrels a day of exports.

On a four-week average basis, overall seaborne exports rose by 237,000 barrels a day from a revised figure for the period to Jan. 20. Shipments to Asia soared, while those to Europe have dried up almost completely.

The average crude shipment from Russia over a four-week period, by destination.

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 volume of crude oil on vessels heading to China, India and Turkey increased by 267,000 barrels a day in the four weeks to January 27, according to Bloomberg data. This is the highest level since the start of 2022 and reflects the growing demand for Russian oil in these three countries.

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

The average number of shipments to Russia's Asian customers jumped to a new high of 3.03 million barrels a day in the four-week period to Jan. 27. This includes shipments that have no final destination, which typically end up in either India or China.

Although the volume of shipments to India appears to have declined, history shows that most of the cargoes on ships that initially have no final destination end up there.

More than 681,000 barrels of oil equivalent are on vessels headed to 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. These 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, running at 510,000 barrels a day in the four weeks to Jan. 27, are those on tankers showing a destination of Ceuta, Kalamata, or no destination at all. Most of those cargoes go on to Asia, but some could end up in Turkey. An increasing number are being transferred from one vessel to another in the Mediterranean for onward journeys through the Suez Canal or on larger vessels around Africa.

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 increased slightly to 146,000 barrels a day in the 28 days to January 27, with Bulgaria the only 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. 27. This is the first time since November 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 were largely unchanged from the previous week when averaged over a four-week period.

Turkey was the only destination for Russian seaborne crude into the Mediterranean for a while. However, in recent weeks, the flow has only increased slightly and is still much lower than it was last year. Turkey was one of the countries that boosted imports after the war began, so it is surprising to see the flow of crude oil so subdued now, as the country is not a party to the EU’s import ban and was 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, increased by half last week, rising to 146,000 barrels a day.

Since the EU import ban went into effect, Bulgaria appears to be taking full advantage of the partial exemption it secured. The Black Sea nation is importing more than three times as much Russian crude as it was during the first eight weeks of 2022.

The average flow of goods to Black Sea destinations over a four-week period was higher than in the previous period. This is according to data from the International Trade Centre.

Russian crude exports increased by 480,000 barrels per day in the seven days to January 27, recovering much of the previous week's loss. The biggest increases were seen in flows from the Baltic and Pacific ports, which were partly offset by a drop in Arctic exports. Shipments from the Black Sea 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 an influx of $8 million from crude-export duties over the seven days to Jan. 27, representing a 16% increase. However, the four-week average income from this source fell by $13 million to $56 million.

Russia introduced a new formula for calculating per-barrel export duty rates at the beginning of January, halving the rate of duty payable at any given crude price. This has resulted in a sharp drop in the Kremlin's four-week average receipts, as successive December periods have dropped out of the calculation. If the old formula had continued to apply, the Kremlin would have received much higher export duty revenue.

President Putin has asked his government to come up with a plan to offset the effects of sanctions on Russia's budget revenues. Officials were asked to prepare suggestions for a new method of assessing prices of Russian crude and products by March 1.

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

The Russian Ministry of Finance has announced that the duty rate for February will be $1.75 per barrel, a 23% decrease from the January rate of $2.28 per barrel. This is the lowest per barrel rate since June 2020, during the Covid 19 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.

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 34 tankers loaded 24.9 million barrels of Russian crude in the week to Jan. 27, according to vessel-tracking data and port agent reports. That's up by 3.4 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.

A total of 34 tankers loaded with Russian crude oil were reported in the week ending January 27.

The volume of Russian crude being loaded at Baltic terminals jumped to just below 2 million barrels a day last week, its highest level since Bloomberg began tracking the flows in detail at the start of 2022. This represents a 19% increase over the previous week.

Crude oil flows from Primorsk and Ust-Luga on a weekly basis.

There were no changes in shipments from Novorossiysk in the Black Sea from the previous week.

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 fell to a nine-week low last week, with just one Suezmax tanker leaving from Murmansk. All cargoes continue to head to Asia via the Suez Canal, with larger vessels replacing the Aframaxes that were used previously for deliveries from the floating storage units at the port.

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. Without these shipments, many businesses would grind to a halt.

Flows from the Pacific regained most of the previous week's loss, with 10 tankers loading at the region's three terminals. This is a positive sign for the region, which has been struggling to regain its footing after a period of decline.

Shuttle tankers carrying Sokol crude are now often waiting much longer than they used to before transferring their cargoes to other vessels off the South Korean port of Yeosu, which may slow shipments of the grade. Round trips between the De Kastri loading terminal and Yeosu are currently taking about 22 days, compared with an average of 14 days in the months before the invasion of Ukraine. The longer wait times are likely due to increased tensions in the region, which have led to more ships being diverted to other ports.

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.