In the seven days to March 10, Russia’s shipments recovered 40% of the previous weeks’ loss, rising to 3.33 million barrels a day. The less volatile four-week average also increased.
There has been no noticeable drop in Russia’s shipping exports since its troops invaded Ukraine more than a year ago, although there may have been a general drop in flows as tankers loaded up with crude previously sent to Europe through the Druzhba pipeline. At present, there is no sign that flows are affected by the 500,000 barrels per day production cut Russia said it would impose in March.
India overtook China as the top buyer of seaborne Russian crude in early November and has continued to buy more than its neighbor ever since. Increasing quantities of Pacific ESPO crude are heading to Indian ports, after months in which Chinese refiners grabbed nearly all available shipments.
India will not violate Western sanctions on Russia – including the $60 a barrel ceiling imposed on oil purchases from Moscow – according to sources familiar with the matter, who said authorities had asked banks and traders to join the rules.
The combined volume of crude on vessels bound for China and India, plus smaller flows to Turkey and quantities on vessels that have not yet indicated a final destination, has rebounded over the past four weeks, to an average of 3.28 million barrels per day, establishing a new high.
As the final destinations of cargoes loaded in late January and early February become apparent, flows to China have soared to new post-invasion highs. Historical models suggest that most cargoes currently identified as “unknown Asia” and heading for the Suez Canal will end up in India.
Ship-to-ship transfers in the Mediterranean continue at a rapid pace. This was most visible off the Spanish North African city of Ceuta and off the Greek coast near Kalamata. At least 46 cargoes have been transferred between vessels at these two locations since the beginning of the year. The volume transferred off the coast of Greece, mainly in Lakonikos Bay, surged in February, rising to more than 10 million barrels, or 360,000 barrels per day. This compares with 4.4 million barrels, equivalent to 156,000 barrels per day transferred off Ceuta.
A tanker carrying a cargo of Russian crude remains anchored off the Ghanaian port of Tema more than two weeks after arriving in the West African country. The National Petroleum Authority has granted a handover period for the unloading of the cargo, but national security considerations have slowed the process, according to people familiar with the matter.
Crude flows by destination
Crude flows in the week to March 10 increased by 220,000 barrels per day over the previous week. On a four-week average, overall maritime exports increased by 116,000 bpd to 3.41 million bpd.
All figures exclude cargoes identified as Kazakhstan KEBCO grade. These are shipments made by KazTransoil JSC transiting Russia for export via the Baltic ports of Ust-Luga and Novorossiysk.
The Kazakh barrels are blended with Russian-sourced crude to create a uniform export grade. Since the Russian invasion of Ukraine, Kazakhstan has renamed its cargoes to distinguish them from those shipped by Russian companies. The transit of crude oil is specifically exempt from EU sanctions.
Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination, surged to a new high of 3.19 million barrels per day in the period to March 10, compared with 3.1 million barrels per day in the period ending March 3.
While volumes bound for China and India appear to have declined, history shows that most cargo on ships with no initial destination eventually ends up in one or other of these countries.
The equivalent of 682,000 barrels per day was on ships that have designated destinations such as Port Said or Suez in Egypt, or have already been or are expected to be transferred from one ship to another off the South Korean port of Yeosu. These voyages typically terminate at ports in India and appear in the table below as “Unknown Asia” until a final destination becomes apparent.
“Others unknown” volumes, which amounted to 558,000 bpd in the four weeks to March 10, are those on tankers showing a destination Gibraltar, Malta or no destination. Most of these cargoes go through the Suez Canal, but some may end up in Turkey. An increasing number are transferred from ship to ship in the Mediterranean to continue their journey to Asia.
Russia’s seaborne crude oil exports to European countries remained stable at 83,000 barrels per day in the 28 days to March 10, with Bulgaria as the only destination. These figures do not include shipments to Turkey.
A market that used to consume more than 1.5 million barrels per day of short sea crude, originating from export terminals in the Baltic, Black Sea and Arctic, has been almost completely lost, to be replaced by long sea destinations in Asia, much more expensive and time consuming to serve.
No Russian crude was shipped to northern European countries in the four weeks to March 10.
Exports to Turkey, Russia’s only remaining Mediterranean customer, rose to 141,000 bpd in the four weeks to March 10. Flows are just over a third of the highs reached in September and October.
Despite not being part of EU sanctions on Russian crude exports, Turkey has become far less important as a lifeline for Moscow since the EU import ban went into effect on Dec. 5. purchases of Russian crude decreased, with flows to the plant of around 50,000 barrels/day on average in January and February, against an average of around 180,000 barrels/day from August to October.
Flows to Bulgaria, now Russia’s only market for crude oil in the Black Sea, have remained stable. Despite Bulgaria obtaining a partial exemption from the EU import ban, Lukoil PJSC appears to be starting to use non-Russian crude oil in its refinery.
Flows by export location
Aggregate flows of Russian crude rose to 3.33 million barrels per day in the week to March 10. The decline in exports from the Baltic and Arctic terminals was more than offset by the increase in flows from the Black Sea and the Pacific.
Figures exclude Ust-Luga and Novorossiysk volumes identified as Kazakhstan KEBCO grade.
Inflows to the Kremlin’s war chest from its crude export tariff rose $5 million to $45 million in the seven days to March 10, while four-week average income rose $2 million to $43 millions.
President Vladimir Putin has signed amendments to how the price of Russian oil is assessed for tax purposes. From April, the mining tax and profit-based tax rates of oil companies will be calculated using a degressive discount to prevailing Brent prices, rather than Urals crude valuations. Export duties, which will be phased out in late 2023, will not be affected by the change.
The tariff rate for March was set at $1.94 a barrel, the first increase since December, and is based on a Ural price of $50.51 a barrel during the assessment period January 15 to February 14th.
Flows from origin to location
The graphs below show the number of vessels departing from each export terminal and the destinations of crude cargoes from the four export regions.
A total of 31 tankers loaded 23.3 million barrels of Russian crude in the week to March 10, ship tracking data and port agent reports show. It was up 1.5 million barrels, or 7%, from the previous week. The destinations are based on where the ships report they are heading at the time of writing, and some will almost certainly change as the voyages progress. All figures exclude cargoes identified as Kazakhstan KEBCO grade.
The total volume of ships loading Russian crude from the Baltic terminals decreased for the first time in five weeks, falling to 1.36 million barrels per day.
Shipments from Novorossiysk to the Black Sea jumped to a three-month high of 688,000 bpd.
Arctic shipments plummeted to a four-week low, with one Suezmax tanker loaded in the week to March 10.
Flows from the Pacific recovered half of the previous week’s loss. Eleven tankers loaded at the region’s three export terminals in the week to March 10, up from eight in the previous week.
A growing volume of ESPO crude is headed to India, with four out of 11 cargoes loaded so far this month, compared with two out of a total of 30 shipments in February.
The volumes bound for unknown destinations are all Sokol cargoes that have either recently been transferred to other vessels in Yeosu, or are currently being transported to an area off the South Korean port from the De Kastri cargo terminal.