Russian Crude Flows Climb Despite Pledge to Stiffen Output Curbs

(Bloomberg) -- Russia’s four-week average crude exports rose for a second straight week in the period to June 16, even as Moscow said it would strictly comply with its OPEC+ output target this month.

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After hitting a year-to-date high in mid-April, shipments had been on a downward trend, dropping by 420,000 barrels a day, or 11%, by the start of June. Since then, though, the four-week average has clawed back one-third of the earlier drop. The gain of 80,000 barrels a day in the latest number was driven by a jump in weekly shipments to a two-month high.

Moscow has dropped an earlier mixture of production and export restrictions in favor of a single output target that’s preferred by its partners in the OPEC+ group of oil producers. That makes it more difficult to determine from export flows whether Russia is meeting its commitments, as production and shipments aren’t perfectly correlated.

Moscow has pledged to compensate for pumping oil above its target in April and for the “limited excessive’’ output seen in May. It has also said that it will start to report production in barrels to the analysts who provide OPEC’s so-called “secondary sources” production estimates, rather than the tons typically used by former Soviet nations. This will allow Russia to determine the conversion factor employed, with early indications suggesting that they’ve selected a number well below that used by most analysts, improving their compliance at a stroke.A five-day gap in the Primorsk loading program will likely drag flows lower in the week to June 23.

Higher weekly export volumes were compounded by a week-on-week increase in oil prices to boost the gross value of Russia’s crude shipments by 9% in the seven days to June 16.

The UK has announced wide-ranging sanctions on Russia. The targets include four vessels in the shadow-fleet of tankers transporting the country’s oil and Ingosstrakh Insurance Co, the largest Moscow-based company that covers shipping risks.

The move comes as Moscow continues to test the effectiveness of sanctions imposed in response to its invasion of Ukraine in February 2022. Three of 21 tankers owned by state-controlled Sovcomflot PJSC have now loaded cargoes of crude after lying idle for several months. The first, the SCF Primorye, has switched its cargo to another vessel while anchored in the Riau archipelago east of Singapore. The other two, the Bratsk and the Belgorod, are heading in the same direction.

Crude Shipments

A total of 34 tankers loaded 25.91 million barrels of Russian crude in the week to June 16, vessel-tracking data and port agent reports show. That was up from 24.72 million barrels the previous week.

Russia’s seaborne crude flows in the week to June 16 rose by 5% to a two-month high of 3.7 million barrels a day. The less volatile four-week average was also up, increasing by about 80,000 barrels a day to 3.42 million, the second straight increase.

A week-on-week increase in shipments from the Baltic Sea ports of Primorsk and Ust-Luga was partly offset by fewer ships leaving Novorossiysk and the Pacific ports of Kozmino and De Kastri.

A five-day gap in the Primorsk loading program, with no loadings scheduled to commence between June 18 and June 22, suggests a period of maintenance work that will halt flows from the port for most of the coming week.

After almost two months out of service, the Zaliv Vostok shuttle tanker is heading back to Sakhalin Island from a shipyard in China. It is due to arrive on Saturday and will bring the number of vessels hauling crude from the Sakhalin 1 project up to two, with the third ship normally employed by the project now also undergoing work in China.

Crude shipments so far this year are running about 30,000 barrels a day above the average for 2023.

Russia terminated its export targets at the end of May, opting instead to restrict production, in line with its partners in the OPEC+ oil producers’ group. The country’s output target is set at 8.978 million barrels a day until the end of September, after which it is scheduled to rise at a rate of 39,000 barrels a day each month until September 2025, as long as market conditions allow.

Two cargoes of Kazakhstan’s KEBCO were loaded at Novorossiysk during the week.

Flows by Destination

Observed shipments to Russia’s Asian customers, including those showing no final destination, edged higher to 3 million barrels a day in the four weeks to June 16 from a revised 2.97 million in the period to June 9.

About 1.23 million barrels a day of crude was loaded onto tankers heading to China. The Asian nation’s seaborne imports are boosted by about 800,000 barrels a day of crude delivered from Russia by pipeline, either directly, or via Kazakhstan.

Flows on ships signaling destinations in India averaged about 1.5 million barrels a day, compared with a revised 1.45 million barrels a day in the period to June 9.

Both the Chinese and Indian figures are likely to rise as the discharge ports become clear for vessels that are not currently showing final destinations.

The equivalent of about 220,000 barrels a day was on vessels signaling Port Said or Suez in Egypt. Those voyages typically end at ports in India or China and show up as “Unknown Asia” until a final destination becomes apparent.

The “Other Unknown” volumes, running at about 50,000 barrels a day in the four weeks to June 16, are those on tankers showing no clear destination. Most originate from Russia’s western ports and go on to transit the Suez Canal, but some could end up in Turkey. Others may be moved from one vessel to another, with the majority of such transfers now taking place in the Mediterranean, most recently off Morocco, or near Sohar in Oman.

Russia’s oil flows continue to be complicated by the Greek navy carrying out exercises in an area that’s become synonymous with the transfer of the nation’s crude. These activities have now been extended to July 15.

Russia’s seaborne crude exports to European countries have ceased, with flows to Bulgaria halted at the end of last year. Moscow also lost about 500,000 barrels a day of pipeline exports to Poland and Germany at the start of 2023, when those countries stopped purchases.

Turkey is now the only short-haul market for shipments from Russia’s western ports, with flows in the 28 days to June 16 rising to about 420,000 barrels a day, their highest in a month.

Export Value

The gross value of Russia’s crude exports rose to a six-week high of $1.79 billion in the seven days to June 16 from about $1.63 billion in the period to June 9, boosted by a combination of higher flows and a week-on-week increase in prices. Export values at Baltic and Black Sea ports were up week-on-week by almost $4.50 a barrel, while key Pacific grade ESPO rose by about $2.50 a barrel. Delivered prices in India also rose, up by about $4.15 a barrel, all according to numbers from Argus Media.Four-week average income was also up, rising by about $40 million to $1.64 billion a week. The four-week average peak of $2.17 billion a week was reached in the period to June 19, 2022.

During the first four weeks after the Group of Seven nations’ price cap on Russian crude exports came into effect in early December 2022, the value of seaborne flows fell to a low of $930 million a week, but soon recovered.

NOTES

This story forms part of a weekly series tracking shipments of crude from Russian export terminals and the gross value of those flows. The next update will be on Tuesday, June 25.

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 Ust-Luga and are not subject to European Union sanctions or a price cap. The Kazakh barrels are blended with crude of Russian origin to create a uniform export stream. Since Russia’s invasion of Ukraine, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies.

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.

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.

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