Russian Oil Flows Edge Lower But Evidence of Cuts Remains Scant

Seaborne crude exports are still well above levels seen in February, the baseline month for cuts

(Bloomberg) — Russian crude oil flows to international markets have drifted lower, while remaining well above levels seen in February, the baseline month for the country’s pledged output cuts.

Four-week average seaborne shipments, which smooth out some of the volatility in weekly numbers, edged down in the period to June 18 to 3.63 million barrels a day from 3.66 million in the period to June 11.

On that basis, flows are now down by 212,000 barrels a day from the peak they reached in the period to May 21, but are still 250,000 barrels a day higher than they were in the four weeks to Feb. 26. February was the baseline month for production cuts promised by the Kremlin.President Vladimir Putin told the St. Petersburg International Economic Forum that the nation’s oil and gas industry is in good shape. “The output in the country is growing and we are happy about it, our sales are robust,” he said, without explaining how that would align with Moscow’s pledge to cut production.

Secondary sources that the OPEC+ producers’ group uses to monitor its members’ production levels raised their estimate for Russia’s February volumes, effectively lifting the country’s output target by about 120,000 barrels a day.

There is still little evidence that the pledged 500,000 barrels a day of cuts — retaliation for Western sanctions imposed after the invasion of Ukraine — have been made, at least not in full. Moscow has cited the diversion of crude previously piped to Germany and Poland through the Druzhba pipeline as an explanation for robust shipments; but that switch happened in January and February, before the output cut was due to come into effect. Flows of Russian crude through the pipeline, now limited to deliveries to Hungary, Slovakia and the Czech Republic, have been stable at about 240,000 barrels a day since February.

And while Russian refineries cut crude processing rates in the first part of May, they have raised them again to the highest levels in nine weeks as the nation’s downstream maintenance season nears its end. Rising refinery runs are helping to lift exports of refined products. Seaborne exports of fuels like diesel and naphtha are on course to edge higher this month.

Crude Flows by Destination

On a four-week average basis, overall seaborne exports in the period to June 18 were down by 35,000 barrels a day to 3.63 million barrels a day. More volatile weekly flows also fell, decreasing by about 40,000 barrels a day to 3.53 million barrels a day.

Weekly data are affected by the scheduling of tankers and loading delays caused by bad weather. Port maintenance can also disrupt exports for several days at a time. 

All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. Those are shipments made by KazTransoil JSC that transit Russia for export through the Baltic ports of Ust-Luga and Novorossiysk.

The Kazakh barrels are blended with crude of Russian origin to create a uniform export grade. Since Russia’s invasion of Ukraine, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies. Transit crude is specifically exempted from European Union sanctions.

  • Asia

Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination, edged lower to 3.29 million barrels a day in the period to June 18 from 3.32 million barrels a day in the four weeks to June 11.

While the volumes heading to India appear to have declined from recent highs, history shows that most of the cargoes on ships without an initial destination eventually end up there or in China.

The equivalent of 422,000 barrels a day was on vessels showing destinations as either Port Said or Suez in Egypt, or which already have been or are expected to be transferred from one ship to another off the South Korean port of Yeosu. Those voyages typically end at ports in India or China and show up in the chart below as “Unknown Asia” until a final destination becomes apparent.

The “Other Unknown” volumes, running at 202,000 barrels a day in the four weeks to June 18, are those on tankers showing no clear destination. Most of those cargoes originate from Russia’s western ports and go on to transit the Suez Canal, but some could end up in Turkey, while other cargoes are transferred from one vessel to another, either in the Mediterranean or, more recently, in the Atlantic Ocean.

Pakistan has received its first cargo of Russian Urals crude after a tanker conducted a rare ship-to-ship transfer off Sohar in Oman, opening up a new, if not large, market for Moscow. Pakistan’s coastal refineries, situated around the port city of Karachi, have a combined processing capacity of about 140,000 barrels a day and run on a regular supply of Middle Eastern crude, mostly from Saudi Arabia, with smaller volumes from the United Arab Emirates.

The supertanker Tasca completed the loading of a third cargo via ship-to-ship transfer in the Atlantic Ocean, according to data from Kpler. It is now heading around Africa, showing an initial destination of Singapore, which it is due to reach on Aug. 3.

The VLCC Monica S took on a cargo of Urals crude via ship-to-ship transfer in the Strait of Malacca before heading to Teluk Semangka at the southern end of the Indonesian island of Sumatra, where it transferred the cargo into the VLCC Success Fortune XL, which is now heading to the Indonesian port of Cilacap.

  • Europe

Russia’s seaborne crude exports to European countries edged higher to 104,000 barrels a day in the 28 days to June 18, with Bulgaria the sole destination. These figures do not include shipments to Turkey.

A market that consumed about 1.5 million barrels a day of short-haul seaborne crude, coming from export terminals in the Baltic, Black Sea and Arctic has been lost almost completely, to be replaced by long-haul destinations in Asia that are much more costly and time-consuming to serve.

No Russian crude was shipped to northern European countries in the four weeks to June 18.

Exports to Turkey, Russia’s only remaining Mediterranean customer, edged lower to 230,000 barrels a day in the four weeks to June 18 from an average of 260,000 barrels a day over the previous four weeks; flows to the country had topped 425,000 barrels a day in October.

Flows to Bulgaria, now Russia’s only Black Sea market for crude, rose to 104,000 barrels a day, their highest level in 11 weeks.

Flows by Export Location

Aggregate flows of Russian crude edged lower to 3.53 million barrels a day in the seven days to June 18, from 3.57 million barrels a day the previous week. A rebound in shipments from the Arctic and Black Sea ports was more than offset by a drop in the flows from the Baltic ports of Primorsk and Ust-Luga.

Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.

Export Revenue

Inflows to the Kremlin’s war chest from its crude-export duty were unchanged at $55 million in the seven days to June 18. Four-week average income increased by $1 million to $54 million.

President Vladimir Putin ordered his government to fine-tune existing indicators and establish additional ones to calculate oil prices for tax purposes in order to reduce the discount to global crude prices. Russia’s government calculates oil taxes using a discount to Brent, which sets the floor price for the nation’s crude for budget purposes. If Russian oil trades above that threshold, the Finance Ministry uses the market price for tax calculations, as has been the case in recent months. From July the discount is currently set at $25/bbl, though this may now be narrowed.

The duty rate for June has been set at $2.21 a barrel, based on an average Urals price of $55.97, which was $23.90 a barrel below Brent during the period between April 15 and May 14. The rate for July will be cut to $2.13 a barrel, based on an average Urals price of $54.57, which was $20.89 a barrel below Brent during the period between May 15 and June 14.

Origin-to-Location Flows

The following charts show the number of ships leaving each export terminal and the destinations of crude cargoes from the four export regions.

A total of 32 tankers loaded 24.7 million barrels of Russian crude in the week to June 18, vessel-tracking data and port agent reports show. That’s down by 280,000 barrels from the previous week’s figure and the smallest volume in six weeks.  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.

The total volume on ships loading Russian crude from Baltic terminals fell to a nine-week low of 1.46 million barrels a day.

Shipments of Russian crude from Novorossiysk in the Black Sea edged higher to 604,000 barrels a day. One cargo of Kazakhstani crude was loaded at the port during the week.

Arctic shipments rose to a four-week high of 430,000 barrels a day, with three Suezmax tankers leaving the port in the week to June 18.

Ten tankers loaded at Russia’s three Pacific export terminals, unchanged from the previous week. The volume of crude shipped from the region remained above 1 million barrels a day for a 12th week.

The volumes heading to unknown destinations are mostly Sokol cargoes that recently have been transferred to other vessels at Yeosu, or are currently being shuttled to an area off the South Korean port from the loading terminal at De Kastri. Most of these are also ending up in India.

Some Sokol cargoes are now being transferred a second time in the waters off southern Malaysia. A small number of ESPO shipments are also being moved from one vessel to another in the same area. All of these cargoes have, so far, gone on to India.

No cargoes were loaded from the Sakhalin Island terminal in the week to June 18. Sakhalin Energy, the operator of the Sakhalin-2 oil and gas project off the island’s east coast, whose cargoes are exported through the port, halted one oil platform in May for maintenance, with a second scheduled for work from June to September. Export volumes from the project are likely to be hit by the work.


Note: This story forms part of a regular weekly series tracking shipments of crude from Russian export terminals and the export duty revenues earned from them by the Russian government.

Note: All figures exclude cargoes owned by Kazakhstan’s KazTransOil JSC, which transit Russia and are shipped from Novorossiysk and Ust-Luga as KEBCO grade crude.

Note: Weeks have been revised to run from Monday to Sunday, rather than Saturday to Friday. This change has been implemented throughout the data series and previous weeks’ figures have been revised.

Note: The next update will be published on Tuesday June 27, with future updates also to be published on Tuesdays.

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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