Russian seaborne crude exports drop to 12-month low as EU ban and price cap looms

Russian crude exports averaged 2.99 million b/d in the month, down 290,000 b/d from August levels and the lowest since September 2021, as global demand oil was still recovering from the pandemic shutdowns, according to data from S&P Global Commodities at Sea. Data excludes Russia’s small share of CPC Blend exports from Kazakhstan.

Russian flows to the Netherlands – home to Europe’s largest refining hub – more than halved over the month to 165,000 bpd in September, from 390,000 bpd in August and pre-war levels of around 525,000 bpd, Commodities at Sea data shows.

European buyers shunned Russian oil ahead of EU sanctions on Russian crude and product imports, which are expected to come into effect on December 5 and February 5, 2023, respectively.

Overall, Russian crude shipments to Europe have now fallen below 1 million bpd for the first time since July 2020, the data showed, down from pre-2020 levels. war of 1.5 million bpd.

Meanwhile, Russian exports to Turkey rose 19% on the month to a record 414,000 bpd as local refiners continued to snap up discounted Russian oil. As a result, Turkey has become the third-largest buyer of crude from Russia behind China and India, according to the data, with Turkey’s refining sector exporting more refined products to Europe and further afield since the war.

Prior to Russia’s invasion of Ukraine, Turkey’s five refineries imported around 130,000 bpd of Russian crude.

Asian change

The data shows that China and India continue to dominate the list of Russian crude importers, buying 60% of Russian exports in the month, up from 54% in August. Flows to China fell by 76,000 bpd during the month, but Indian imports increased by 60,000 bpd to a combined average of 1.77m bpd.

Discounts for Russian crudes tightened sharply in early August, reducing their appeal relative to non-Russian alternatives after hitting $40/bbl in June and July. The value of Russia’s main Urals crude exports to Europe, however, still averaged $22/bbl below September-dated Brent, according to data from S&P Global.

Tanker rates for transporting Russian crude to Asia have also risen since February, making it less attractive to buy Moscow’s oil compared to Asia’s traditional sources of supply in the Middle East.

Russian crude flows to Asia are expected to increase further by the end of the year if a US-imposed price cap on Russian oil comes into effect.

The G7 price cap would likely mitigate potential trade flow disruptions for Russia, according to S&P Global Commodity Insights, as Moscow needs to redirect some 2.5 million bpd of crude and product exports currently exported to Russia. Europe.

“We still anticipate that a majority of soon-to-be-banned EU imports will find other buyers, with or without a ‘price exception’, on ships that do not require Western insurance or services,” he said. said Paul Sheldon, chief geopolitical adviser at S&P Global. .

Lukoil in Europe

The EU continues to replace its imports of Russian crude with alternative crudes from the United States, Egypt, Saudi Arabia, Iraq, Angola, Cameroon and increasing flows from recent oil developments offshore Guyana, according to the data.

Elsewhere in Europe, data shows Russia’s Lukoil continues to supply discounted Urals crude to its two EU-based refineries in Italy and Bulgaria. Eager to take advantage of sky-high refining margins from processing cheap Russian crude, imports of Russian oil into Bulgaria averaged 155,000 bpd in September, more than double pre-war levels. Bulgaria, which imports Russian crude via the Black Sea to supply the 190,000 bpd Neftokhim refinery owned by Lukoil in Burgas, is allowed to buy Russian crude for another two years until December 2024.

In Italy, where Lukoil owns the 320,000 bpd ISAB refining complex in Sicily – Italy’s largest plant – Russian imports amounted to 325,000 bpd in September, the data showed, up from compared to pre-war levels of around 150,000 bpd.

Margins for processing Urals crude at a typical northwest European refinery averaged around $40/bbl in September, according to S&P Global estimates, twice the margin of refining for processing Bonny Light or WTI crudes.

Exports of Russian refined products also continue their downward trend, the data showed, averaging 2.10 million bpd in September, an 11% reduction from the average for the first half of 2018. 41 million b/d.
Source: Platts