While it’s too early to say with confidence that self-sanctioning and pressure from the US on India, China and other buyers will have a sustained impact, there are early signs that the Asian nations may not be able to fully replace Russia’s European buyers. The trend is seen most clearly when week-to-week variations are smoothed out using rolling averages.
There’s still a long way to go before the drop in shipments hits the Kremlin’s war chest hard enough to give President Vladimir Putin second thoughts about his invasion of Ukraine. Rising crude prices boost Russia’s export duty revenues and offset some of the reduction in crude flows — estimated income from crude export duty is still running above $160 million a week. Still, while that puts it up by almost 25% from immediately prior to the invasion, it’s down by a similar percentage from peak levels in April.
A US-led plan to impose a price cap on Russian oil exports is in the works, but faces significant obstacles, while President Joe Biden’s request for more oil from Saudi Arabia and its OPEC partners received a somewhat ambivalent response. Any increase will come through the OPEC+ group of oil producers, rather than unilaterally from Saudi Arabia and the United Arab Emirates. Russia’s leading role in that group means that any extra supply is likely to be modest.
The best hope for reducing the Kremlin’s oil income is a drop in global oil demand driving down prices, but the big forecasting agencies don’t see that on the horizon.
Crude flows by destination
Gauging exports through vessel movements is very noisy because of loading schedules, maintenance, weather and other things that can influence flows. Taking longer-running averages can smooth out some, but not all, of that noise.
Using a rolling four-week average of exports indicates that Russia’s seaborne flows have been on a downtrend since mid-June, according to tanker tracking data monitored by Bloomberg.
On that basis, flows have dropped to 3.24 million barrels a day in the period to July 15, falling in each of the past four weeks. They are now down by 467,000 barrels a day, or 13%, since mid-June.
Asian countries, dominated by China and India, are taking more than half of all the crude shipped from the Russia. Flows to Asia have accounted for between 55% and 56% of Russia’s total seaborne exports for the past six weeks. That figure includes volumes on tankers heading from Baltic and Black Sea ports to the Suez Canal and is down from a high of 63% in the four weeks to April 15.
Shipments to China averaged 784,000 barrels a day in the most recent four-week period, with flows to India at 679,000 barrels a day. But both those figures are expected to rise, once destinations become known for about 350,000 barrels a day of crude on tankers yet to signal final discharge locations. Shipments to Asian countries other than China and India have virtually dried up, with only rare cargoes heading to Japan and South Korea from Pacific terminals.
Based on current destinations, the average flow of Russian crude to Asia in the four weeks to July 15 was the lowest in 15 weeks. That remains true if all the crude on tankers yet to indicate whether they are heading to the region start to signal Asian ports in the coming weeks.
The volume shipped from Russia to northern Europe has been creeping back up in recent weeks. Most of that is going into storage tanks at Rotterdam in the Netherlands, with small volumes going to Poland and Finland. Flows in the four weeks to July 15 topped 450,000 barrels a day for the first time in 11 weeks.
Four-week average shipments of Russian crude to the Mediterranean soared after the invasion of Ukraine but have been drifting lower since peaking in mid-June. In the period to July 15, they were the lowest in 13 weeks, driven by a drop in volumes heading to Italian ports.
Lukoil’s ISAB refinery on the Italian island of Sicily remains a key buyer of Russian crude, while Turkey has also boosted purchases. After a flurry of shipments in mid-April, flows to the Italian port of Trieste have slowed to about one a week.
Combined shipments to Bulgaria and Romania have fallen by 40% since mid-June on a four-week rolling average basis, averaging 230,000 barrels a day in the week to July 15. Deliveries to Bulgaria have fallen from their June highs, while shipments to Romania are also down in the latest four-week period.
Weekly flows and export duty revenue
Aggregate crude flows from Russian ports edged higher week-on-week, increasing by 73,000 barrels a day, or 2%, to 3.19 million barrels a day in the week to July 15.
A drop in shipments from the Baltic was offset by increases from the other three exporting regions, to leave Russia’s seaborne crude shipments recovering just a small part of the previous week’s decline.
Moscow’s revenue from export duty edged higher in the week to July 15, rising by $4 million, or 2%, to $168 million from a revised $164 million in the week to July 8.
The small increase took weekly duty revenues to their highest in six weeks, but they are still substantially below the peaks seen in April.
Crude shipments in July earn the Kremlin $55.20 a ton (about $7.53 a barrel), up from $44.80 a ton ($6.11 a barrel) in June. That is the highest duty rate charged by the Russian government since April, reflecting an increase in Urals prices between mid-May and mid-June compared with the month earlier. But rates will ease slightly in August, dropping to $53 a ton (about $7.23 a barrel).
Crude flows by origin
A total of 31 tankers loaded 22.3 million barrels from the country’s export terminals in the week to July 15, vessel-tracking data and port agent reports show.
The total volume of crude on ships loading from the Baltic terminals at Primorsk and Ust-Luga edged lower in the week to July 15, with one fewer tanker leaving Ust-Luga.
The volume on tankers loading at Baltic terminals and showing destinations in northern Europe slipped back to equal its lowest since March, with more crude heading to the Mediterranean.
Flows from the Baltic to Asia remained at just over 625,000 barrels a day for a fourth week, but the volumes on ships yet to show a final destination suggests these figure will rise.
Six tankers completed loading at Novorossiysk in the Black Sea in the week to July 15, up by one from the previous week. All are showing destinations indicating that they will discharge at ports in the Mediterranean and Black Sea regions.
Shipments from floating storage units at Russia’s Arctic port of Murmansk rose in the week to July 15. One cargo was loaded from Gazprom Neft’s Umba floating storage unit and one from Lukoil’s Kola unit. Both are headed to Rotterdam.
Crude flows from Russia’s three eastern oil terminals — Kozmino, De Kastri and Prigorodnoye — rebounded week-on-week to 938,000 barrels a day.
Eight tankers loaded ESPO crude at Kozmino, unchanged from the previous week. One cargo is heading for India, while China has taken the others.
There were no shipments for a 10th week from De Kastri, which handles Sokol crude from the Sakhalin 1 project.
One cargo of Sakhalin Blend crude was loaded in the week to July 15 and delivered to South Korea.