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Russian Oil Flows Dive, Hurting Putin’s War Chest

Russian Oil Flows Dive, Hurting Putin's War Chest

 

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(Bloomberg) — Russia’s seaborne crude exports have fallen sharply in the first half of September, hit first by a storm in the Pacific and then by an unexplained decline in shipments from the Baltic. Flows to the big Asian buyers — China and India — aren’t offsetting a drop in volumes for Europe.

Crude shipped from Russia’s ports has fallen by almost 900,000 barrels a day in two weeks, averaging 2.54 million barrels a day in the week to Sept. 16, compared with 3.42 million in the seven days to Sept. 2. Using a four-week moving average to smooth out variability in the figures, shipments fell below 3 million barrels a day for the first time in more than five months. If cargoes don’t rebound, the hit to the Kremlin’s revenues from lower volumes will soon be compounded by another drop in export duty rates, which are set to fall by 15% in October. That will take the per-barrel income to its lowest since February 2021, reflecting both lower international crude prices and a widening discount for Urals against Brent crude during the mid-August to mid-September period.The headwinds for President Vladimir Putin are strengthening just as the US is pressing buyers of Russian oil to sign up to a price cap that would see purchasers granted access to insurance and other essential services only if the price paid is below a yet-to-be-determined threshold. While key customers China, India and Turkey are unlikely to endorse the plan, the price cap may boost their bargaining power over Russia for future purchases.

Based on current destinations, the average flow of Russian crude to Europe and the wider Mediterranean market, including Turkey, in the four weeks to Sept. 16 fell to its lowest in a month, while shipments to Asia edged lower for a second week.

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 European Union sanctions on Russia’s seaborne shipments that are due to come into effect in December.

Crude Flows by Destination:

Europe

Russia’s seaborne crude exports to European countries fell sharply in the four weeks to Sept. 16, dropping by 172,000 barrels a day, or 18%, from the period to Sept. 9. At 804,000 barrels a day, average shipments to European buyers fell to their lowest so far this year, as more customers shun Russian supplies in the run-up to sanctions that are due to come into effect on Dec. 5.

The volume shipped from Russia to northern Europe fell to its lowest level for the year so far in the four weeks to Sept. 16. Flows averaged just 308,000 barrels a day during the most recent period, with a drop in the volume sent to Poland. Shipments to storage tanks in Rotterdam averaged 256,000 barrels a day, about half the volume seen before the invasion of Ukraine.

Exports to Mediterranean countries fell back from the previous week’s year-to-date high in the four weeks to Sept. 16, driven by a drop in shipments to Italy. Flows to Turkey remained above 350,000 barrels a day.

Combined flows to Bulgaria and Romania slipped for a third week in the period to Sept. 16, dropping below 150,000 barrels a day for the first time in five weeks.

Asia

There has been no surge in flows of Russian crude to Asia to offset the drop in shipments to Europe. The total volume loaded onto tankers showing destinations in Asia edged lower in the four weeks to Sept. 16, compared with the period ending Sept. 9. 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, though an increasing number have been heading to China in recent weeks.

Flows by Export Location

Aggregate flows of Russian crude fell for a second week, dropping by 255,000 barrels a day, or 9%, in the seven days to Sept. 16, compared with the previous week. Flows from the Baltic ports of Primorsk and Ust-Luga were the lowest so far this year. Black Sea shipments were also down. 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 for a second week, dropping to a 12-week low of $126 million in the seven days to Sept. 16.

Export duty rates are set to fall again in October, dropping by 15% to $6.06 a barrel.  That’s the lowest per barrel rate since February 2021 and reflects both a drop in Brent prices and a widening of the discount for Urals against the North Sea benchmark. The discount for Urals against Brent crude during the mid-August to mid-September period widened to about $21.50 a barrel, up from about $18.70 a barrel the previous month, according to Bloomberg calculations using figures published 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 23 tankers loaded 17.8 million barrels of Russian crude in the week to Sept. 16, vessel-tracking data and port agent reports show. That’s down by 1.8 million barrels, to the lowest volume in eight 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 of crude on ships loading Russian crude from Baltic terminals slumped to the lowest level of the year so far, dropping below 1 million barrels a day.

Shipments from Novorossiysk in the Black Sea also fell, dropping to a five-week low.

Arctic shipments rebounded, with two vessels departing Murmansk in the week to Sept. 16.

Crude flows from Russia’s eastern oil terminals rebounded to just over 1 million barrels a day after the previous week’s slump, caused by the passage of Typhoon Hinnamnor. All of the cargoes shipped in the week to Sept. 16, nine of ESPO and one of Sakhalin Blend crude, were destined for China. There have been no shipments of Sokol crude since May.

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 have been revised to exclude cargoes owned by Kazakhstan’s KazTransOil JSC, which transit Russia and are shipped from Novorossiysk and Ust-Luga.

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 }

©2022 Bloomberg L.P.

 

Source: Investing.com

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