Russian Crude Shipments Hold Steady Before Sanctions Onslaught

(Bloomberg) -- Russia’s seaborne crude exports were stable ahead of the toughest sanctions yet imposed on its oil sector in response to Moscow’s 2022 invasion of Ukraine.

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But flows could be hit in the coming weeks after the US took measures on Friday against two of the country’s top exporters and about 160 oil tankers, as well as key traders, insurers and a Chinese company that facilitated the unloading of a cargo from a previously sanctioned ship.

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Traders will be scrutinizing shipments closely in the coming months given that the two firms shipped almost 30% of Russia's seaborne exports while the traders and tankers targeted have moved millions of barrels of oil. The US measures have undermined industry expectations for a large global supply surplus this year and boosted crude futures.

The impact of these latest moves will be felt particularly strongly in Russia’s Pacific flows. About three-quarters of ESPO cargoes shipped since the start of October were carried on vessels that have now been sanctioned, while the entire fleets of specialized shuttle tankers used by the Sakhalin 1 and Sakhalin 2 oil and gas projects have also been blacklisted.

Crude flows in the four weeks to Jan. 5 — a measure that smooths out some of the volatility seen in shorter timeframes — edged up by just 10,000 barrels a day, but remained below 3 million barrels for the third straight week and close to the 16-month low seen in the previous week, according to vessel tracking data compiled by Bloomberg.

India has said that it will allow sanctioned tankers booked before Friday, when the US announced its latest measures, to discharge at its ports until March 12, the end of a US-imposed wind-down period. But the country’s state-owned refiners say the impact may be temporary, as Moscow finds workarounds. They also expect the new Trump administration to take a softer line against Moscow.

Crude Shipments

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A total of 27 tankers loaded 21.06 million barrels of Russian crude in the week to Jan. 12, vessel-tracking data and port-agent reports show. The volume was down from a revised 21.18 million barrels on 28 ships the previous week.

Daily crude flows in the seven days to Jan. 12 were little changed from the previous week, edging lower by about 20,000 barrels to 3.01 million. Lower flows from the country’s Baltic and Pacific ports were offset by an increase in shipments from the Black Sea.

A surge in shipments from the Black Sea port of Novorossiysk last week was offset by the effect of high winds, gusting to more than 40 miles an hour, at Kozmino, the main Pacific outlet for Russian crude, which hampered loading operations in the second half of the period.

Less volatile four-week average flows were also little changed, edging in the opposite direction to average 2.96 million barrels a day, up by 10,000 from the period to Jan. 5 and breaking a three-week run of lower shipments.

Crude shipments in 2024 were about 80,000 barrels a day, or 2.5%, below the average for the whole of the previous year.

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Two cargoes of Kazakhstan’s KEBCO crude were loaded at Ust-Luga on the Baltic Sea and one at Novorossiysk on the Black Sea during the week.

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 March, after a planned easing of some output cuts was delayed for a third time.

Moscow has also pledged to make deeper output cuts between March and September to compensate for pumping above its OPEC+ quota last year, though this schedule could be revised.

Export Value

The Kremlin’s oil income was boosted by a jump in the price of Russian crude, which lifted the gross value of Moscow’s exports by about $35 million to $1.45 billion in the week to Jan. 12.

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Export values at Baltic ports were up week-on-week by about $3.80 a barrel, while those for Black Sea loading increased by about $2.50 a barrel. The price for key Pacific grade ESPO rose by about $1.80 compared with the previous week. Delivered prices in India were up by about $2.90, all according to numbers from Argus Media.

Four-week average income rose to about $1.37 billion a week, from $1.35 billion in the period to Jan. 5.

On this basis, the price of Russia’s shipments from the Baltic in the four weeks to Jan. 12 was up by about $1.40 a barrel from the period to Jan. 5, while those for Black Sea loading increased by about $1 a barrel. Prices for key Pacific grade ESPO were higher by about $1.10 a barrel.

Flows by Destination

Observed shipments to Russia’s Asian customers, including those showing no final destination, fell to 2.64 million barrels a day in the four weeks to Jan. 12. That’s about 21% below the average level seen during the most recent peak in April.

About 1.08 million barrels a day of crude were 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 1.32 million barrels a day, up from 1.2 million for the period to Jan. 5.

The Indian figures, in particular, are likely to rise as the discharge ports become clear for vessels that are not currently showing final destinations. Most of those heading from Russia’s western ports through the Suez Canal end up in the south Asian nation.

The equivalent of about 230,000 barrels a day was on vessels signaling Port Said or Suez in Egypt. Those show up as “Unknown Asia” until a final destination becomes apparent.

Russia’s seaborne crude exports to European countries have ceased, with flows to Bulgaria halted at the end of 2023. 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 Jan. 12 up by 60,000 barrels a day from the period to Jan. 5 to about 300,000 barrels a day.

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, Jan. 21.

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 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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