The great Russian oil switch is gathering momentum – Times of India
Two-thirds of crude loaded onto tankers at Russian ports is now heading to Asia. That compares with less than two-fifths in the weeks before Vladimir Putin ordered his troops into Ukraine in February. China and India form the backbone of the trade, with minor volumes heading to places like Sri Lanka and the United Arab Emirates.
European Union sanctions, which will halt almost all seaborne crude deliveries from Russia to the bloc’s members, will come into force in just three weeks’ time. The measures will also bar European tankers from hauling Russian crude and prohibit the provision of insurance, brokerage, finance, vessel classification and other services. There will be exemptions for vessels carrying cargoes that were purchased at a price below a yet-to-be-agreed cap.
The UK has followed the EU’s lead in banning its companies from providing such services to ships. This move, like the EU sanctions, will come into effect on Dec. 5.
Total cargoes shipped from Russia fell to a three-week low of 2.9 million barrels a day in the seven days to Nov. 11, while the less volatile four-week average was also down, though it remained above 3 million barrels a day for a fifth week. That contributed to the Kremlin’s 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 2.39 million barrels a day in the four weeks to Nov. 11.
Tankers hauling Russian crude are becoming more cagey about their destinations. There has been a big jump in vessels showing their next destination as Port Said or the Suez Canal. This has been accompanied by a drop in recent weeks in the volume on tankers indicating that they’re heading to India. It remains likely though that most of these vessels will begin to signal Indian ports once they pass through the canal.
Tankers loading now at the Baltic ports of Primorsk or Ust-Luga will not reach discharge terminals in China or India before the EU ban on the provision of insurance and other services comes into effect. Any cargo bought at a price above the yet-to-be-agreed cap will lose cover on Dec. 5 as the rules currently stand. The US and UK have introduced waivers to their rules, exempting cargoes purchased before that date, as long as they are delivered by Jan. 19. It is expected that the EU will follow suit.
Shipments from Russia’s Pacific ports take only a few days to reach Chinese import terminals and the voyage from the Black Sea to Turkey is similarly short. In contrast, deliveries to India from all of Russia’s export terminals take several weeks, putting them at greater risk of falling foul of sanctions before they arrive.
A cargo of crude from the Arctic port of Murmansk, heading to China via the Northern Sea Route along Russia’s Arctic coast, is now heading along Russia’s Pacific coast and is expected to arrive at the port of Rizhao on Friday.
Crude flows by destination:
On a four-week average basis, overall seaborne exports gave up most of the previous week’s gain to average of 3.12 million barrels a day. Flows remained above 3 million barrels a day for a fifth week. Shipments were lower to all regions except Asia.
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.
Shipments to Russia’s Asian customers, plus those on vessels showing no final destination, which typically end up in either India or China, soared in the seven days to Nov. 11. The volume of crude heading to Asia hit 2.01 million barrels a day on a four-week rolling average basis, with a further 76,000 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.
Russia’s seaborne crude exports to European countries gave up the previous week’s gain, dropping to a five-week low of 700,000 barrels a day in the 28 days to Nov. 11. Flows were down by 89,000 barrels a day, or 11%, from the period to Nov. 4. These figures do not include shipments to Turkey.
The volume shipped from Russia to northern European countries fell in the four weeks to Nov. 11 to the lowest in five weeks. All shipments went to storage tanks in Rotterdam for a fifth week.
Exports to Mediterranean countries slipped to 693,000 barrels a day on average in the four weeks to Nov. 11. Flows to the region, including Turkey, which is excluded from the European figures at the top of this section, gave up almost all of the previous week’s gain. Shipments to Turkey remained above 300,000 barrels a day for a fifth week. That’s more than three times the volume typically seen before Russian troops invaded Ukraine.
Combined flows to Bulgaria and Romania fell to an eight-week low of 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.
Flows by export location
Aggregate flows of Russian crude fell by 704,000 barrels a day, or 20%, in the seven days to Nov. 11, compared with the previous week. Shipments were down from all regions, with the biggest drop in both volume and percentage terms seen in the Arctic. Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.
Inflows to the Kremlin’s war chest from its crude-export duty fell by $31 million to $118 million in the seven days to Nov. 11, with the four-week average income also dropping, down by $4 million to $130 million. The weekly measure is the lowest since the first week of the year, with the drop in volumes compounded by a lower pre-barrel rate of export duty for November shipments.
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 published in the next few days.