Russia’s crude shipments are holding steady in the face of mounting pressures on its critical oil trade, but the steeper discounts that are keeping the barrels flowing have hammered the Kremlin’s revenues.
Volumes averaged 3.33 million barrels a day in the four weeks to Feb. 8, according to vessel-tracking data compiled by Bloomberg. That nudged up from the revised figure for the period to Feb. 1, but was down by about 540,000 barrels a day from the pre-Christmas peak.
The stable flows haven’t prevented a collapse in Moscow’s oil revenues, which fell to the lowest in more than five years in January, as weaker global prices, steeper discounts for the nation’s barrels, and a stronger currency took a toll on the budget. Rising tensions in the Middle East have lifted prices in the first days of February, but the pressures on Russia’s crude flows are intensifying.
Shipments to India have fallen to less than half their peak level and could fall further even if New Delhi doesn’t fully halt the trade. Deliveries to Indian ports have averaged about 1 million barrels a day in the first six weeks of the year and stood at just 900,000 barrels a day in the first full week of February. That compares with a peak of more than 2 million barrels a day in June and July 2023.
India’s refiners have provided a lifeline to Moscow’s oil exporters, stepping in to take the barrels shunned by their European counterparts after Moscow’s 2022 invasion of Ukraine. But they’ve come under growing pressure, with a European ban on imports of products refined from Russian crude and an additional 25 per cent on exports to the US imposed by President Donald Trump.
Trump removed that tariff last week, part of a trade deal reached by the two nations, noting that “India has committed to stop directly or indirectly importing Russian Federation oil.” The flow of Moscow’s barrels to the south Asian nation could halve by April from its already low January level, but New Delhi’s willingness to cut will be tested by steeper discounts.
Russia’s Urals grade is being offered at almost $15 a barrel below global benchmark Brent, inclusive of shipping and other costs, according to data from Argus Media. The discount has widened from about $10 at the start of the year.
In the meantime, tankers full of Urals crude are increasingly heading further east. More than a dozen tankers hauling the benchmark Russian grade are passing India and heading toward China, doubling the distance the cargoes have to be hauled before being delivered.
A surge in deliveries to China, which are running at about 2.2 million barrels a day in the first eight days of February, is starting to reduce the amount of Russian crude held at sea. The rapid build-up saw almost 60 million barrels added between the end of August and the middle of January. But about 9 million barrels of that has been discharged in the past two weeks to take the volume of Moscow’s crude on tankers to about 132 million barrels.
Challenges in finding buyers may be starting to impact Russia’s oil production. Crude output fell for a second straight month in January, dropping almost 300,000 barrels a day below the amount the nation is permitted to pump under an agreement with the Organization of the Petroleum Exporting Countries and allies.
Crude shipments
A total of 28 tankers loaded 22.08 million barrels of Russian crude in the week to Feb. 8, vessel-tracking data and port-agent reports show. The volume was down from a revised 25.1 million barrels on 34 ships the previous week.
On a daily average basis, shipments in the week to Feb. 8 fell to 3.15 million barrels a day, a decrease of about 430,000 barrels a day from the previous week.
The flows are volatile, affected by weather, maintenance work, sanctions and the timing of shipments.
There were no shipments of Kazakhstan’s Kebco grade during the week.
The drop in flows last week was driven by declines in shipments of Urals crude from both the Baltic and the Black Sea and a slump in ESPO cargoes from the Pacific.
Export value
On a four-week average basis, the gross value of Moscow’s exports edged up to $1.04 billion a week in the 28 days to Feb. 8. The small increase in average prices was driven by elevated tensions in the Middle East, which are keeping a floor under Russian crude prices for now, alongside global benchmarks.
Using this measure, the export prices of Russia’s Urals from the Baltic rose by about $1.50 to $41.87 a barrel and Black Sea cargoes were up by about $1.60 a barrel to $39.40. The price of Pacific ESPO crude increased by $1.90 to average $50.54 a barrel. Delivered prices in India rose by $1 to $58.61 a barrel, the highest since November. All prices are according to numbers from Argus Media.
On a weekly basis, the value of exports averaged about $1.02 billion in the 7 days to Feb. 2, down by $145 million from the revised figure for the previous week, with the drop in flows compounded by lower Urals prices.
Flows by destination
Observed shipments to Russia’s Asian customers, including those showing no final destination, rose to 3.14 million barrels a day in the 28 days to Feb. 8, up from 3.04 million in the period to Feb. 1.
While the amount of Russian crude heading to both China and India appears to be falling sharply, the volume on vessels yet to show a final destination has soared, allowing for much of that pattern to be reversed in time. Tankers are increasingly showing interim destinations, such as Suez or Port Sudan, until they are well across the Arabian Sea, while some never show a final calling point, even after mooring to discharge.
Vessels are also spending longer at sea, with several tankers diverting from initial destinations on the west coast of India or in Turkey. They are also getting held up waiting to discharge at Chinese and Indian ports.
Flows on tankers signaling Chinese ports stood at 1.15 million barrels a day in the four weeks to Feb. 8, down slightly from a revised 1.17 million barrels a day for the period to Feb. 1. The amount destined for India fell to just 390,000 barrels a day from a revised 510,000 barrels a day in the earlier period. But there is the equivalent of 1.6 million barrels a day on vessels yet to show a final destination.
Of that, about 1.33 million barrels a day is on ships from Russia’s western ports showing their destination as Port Said or the Suez Canal, or those from Pacific ports with no clear delivery point, and a further 270,000 barrels a day is on tankers yet to signal any destination.
Flows to Turkey in the four weeks to Feb. 8 fell to a five-week low of about 160,000 barrels a day from a revised 220,000 barrels a day during the period to Feb. 1.
Four-week average flows to Syria fell to zero. Tankers hauling Russian crude to the east Mediterranean nation rarely signal their destination and usually disappear from automated tracking systems when they’re south of Crete, making it difficult to estimate flows in advance of ships arriving off the port of Baniyas, where they can usually be picked up on satellite photos.
