Russia Loses 90% of Its Key European Oil Market Before Sanctions

(Bloomberg) — With just two weeks to go until European Union sanctions come into force, Russia has already lost more than 90% of its market in the bloc’s northern countries, previously the mainstay of shipments from the Baltic and Arctic terminals.Russia shipped just 95,000 barrels a day to Rotterdam — its only remaining European destination for seaborne deliveries outside the Mediterranean/Black Sea basin — in the four weeks to Nov. 18. That’s down from more than 1.2 million barrels a day sent to the region’s ports each day in early February. States like Lithuania, France and Germany halted such imports several months ago, while Poland followed suit in September.

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Three-quarters of the crude loaded at Russia’s Baltic ports is now headed to Asia, with Indian refiners snapping up barrels to take advantage of a grace period offered by the US and UK and expected to be adopted by the EU. That would exempt from sanctions cargoes that are loaded before the ban comes into effect on Dec. 5, as long as they are delivered by Jan. 19.The G7 nations are expected to announce the level of their price cap on Russian crude shipments as soon as Wednesday. Cargoes purchased at prices above that level would lose access to European and UK ships, insurance and other services.

Total volumes shipped from Russia fell to a nine-week low of 2.67 million barrels a day in the seven days to Nov. 18, while the less volatile four-week average was also down, though it remained above 3 million barrels a day for a sixth week. The continued declines contributed to the Kremlin’s weekly revenues from the oil trade dropping to the lowest since early January.

The volume of crude on vessels heading to China, India and Turkey, the three countries that have emerged as the biggest buyers of displaced Russian supplies, plus the quantities on ships that are yet to show a final destination, rose to a record 2.45 million barrels a day in the four weeks to Nov. 18.Diversion of Russia’s crude exports to Asia is upending trade flows and giving a new lease of life to aging oil tankers that may otherwise have been heading for scrap.

And tankers hauling Russian crude are becoming more cagey about their final destinations. There has been a big jump in vessels leaving the Baltic and showing their next destination as Port Said or the Suez Canal. It remains likely that most of these vessels will begin to signal Indian ports once they pass through the canal.

A cargo of crude from the port of Murmansk has reached China via the Northern Sea Route along Russia’s Arctic coast. The oil tanker Vasily Dinkov arrived off the port of Rizhao on Friday, where it is now anchored waiting to discharge.

Crude Flows by Destination:

On a four-week average basis, overall seaborne exports edged lower for a second week to average of 3.07 million barrels a day. Flows remained above 3 million barrels a day for a sixth week. Shipments to Asia hit a new high, while those to Europe continued to move in the opposite direction.

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

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

  • Asia

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Shipments to Russia’s Asian customers, plus those on vessels showing no final destination, which typically end up in either India or China, rose for a fourth week in the seven days to Nov. 18. The volume of crude heading to Asia hit 2.1 million barrels a day on a four-week rolling average basis, with a further 75,000 barrels a day on tankers whose point of discharge is unclear. The combined figure set a new high for the year so far.

All of the tankers carrying crude to unidentified Asian destinations are signaling Port Said or the Suez Canal, with final discharge points unlikely to be apparent until they have passed through the waterway into the Red Sea, at the earliest. Most of those ships end up in India, with some heading to China and the occasional vessel going to other destinations such as the United Arab Emirates, or Sri Lanka.

  • Europe

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Russia’s seaborne crude exports to European countries fell to their lowest level for the year so far, averaging 569,000 barrels a day in the 28 days to Nov. 18. Flows were down by 131,000 barrels a day, or 19%, from the period to Nov. 11. These figures do not include shipments to Turkey.

The volume shipped from Russia to northern European countries fell to a new low, with Rotterdam the only destination for deliveries to the region for a ninth week. Flows to the region dropped to 95,000 barrels a day in the four weeks to Nov. 18, down from more than 1.2 million barrels a day before Moscow’s troops invaded Ukraine in late February.

Exports to Mediterranean countries slipped to 631,000 barrels a day on average in the four weeks to Nov. 18, down from 693,000 barrels a day in the same period to Nov. 11. Flows to the region, including Turkey, which is excluded from the European figures at the top of this section, fell for a second week. Shipments to Turkey remained above 300,000 barrels a day for a sixth week. That’s more than three times the volume typically seen before Russian troops invaded Ukraine, and the country is expected to remain an important destination for Russian crude after EU sanctions come into effect on Dec. 5.

Combined flows to Bulgaria and Romania were unchanged at 146,000 barrels a day, less than half of the peak volume seen in June. Almost all of the volume heading to customers in the Black Sea ends up in Bulgaria. The country secured a partial exemption from the EU ban on seaborne crude imports from Russia, which should support inflows after the ban on flows into other EU countries comes into force.

Flows by Export Location

Aggregate flows of Russian crude fell by 227,000 barrels a day, or 8%, in the seven days to Nov. 18, compared with the previous week. Shipments were down from the Black Sea and the Pacific, while exports rose from the Arctic port of Murmansk. The flows of Russian crude from the Baltic ports of Primorsk and Ust-Luga were unchanged. 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 fell by $9 million to $109 million in the seven days to Nov. 18, with the four-week average income also dropping, down by $3 million to $127 million. The weekly measure was the lowest since the first week of the year, driven by the drop in volumes. The four-week average was the lowest since February.

The November duty rate is $5.83 a barrel, the lowest level since January 2021, with the Urals discount to Brent during the latest calculation period, which ran from Sept. 15 to Oct. 14, at about $25.50 a barrel. The December duty rate will be 8 cents a barrel higher at $5.91, according to figures released by the Russian Ministry of Finance.

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 26 tankers loaded 18.66 million barrels of Russian crude in the week to Nov. 18, vessel-tracking data and port agent reports show. That’s down by 1.6 million barrels, or 8%, from the previous week. 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 was unchanged in the week to Nov. 18, with one shipment to northern Europe. Three-quarters of the crude loaded at Baltic ports is now headed to Asia.

Shipments from Novorossiysk in the Black Sea slumped to a four-week low, with flows equaling their smallest since April.

Arctic shipments rebounded from the previous week’s slump. As with shipments from the Baltic, almost three-quarters of the volume sent from Murmansk in the week to Nov. 18 is heading to Asia.

Shipments from the Pacific fell for a second week. All of the seven cargoes of ESPO crude that were loaded are heading to China. While both vessels that loaded Sokol are showing a destination of Yeosu in South Korea, it’s likely that they will conduct ship-to-ship transfers outside the port, as previous tankers have done.

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: Data on crude flows can also be found at {DSET CRUDE }. The numbers, which are generated by a bot, may differ from those in this story.

Note: Aggregate weekly seaborne flows from Russian ports in the Baltic, Black Sea, Arctic and Pacific can be found on the Bloomberg terminal by typing {ALLX CUR1 }.

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Source: https://finance.yahoo.com/news/russia-loses-90-key-european-121658502.html