Russia records a 60% loss of its maritime crude market in Europe

Russia is believed to have lost three-fifths of maritime crude sales to Europe since Russia invaded Ukraine in February 2022. That market is set to disappear in eight weeks, and the most recent sanctions will make it difficult to divert flows elsewhere.

Crude shipments to Europe averaged 630,000 barrels a day in the four weeks to October 7, down from the 1.62 million figure recorded before the invasion.

Tankers loaded with Russian oil are forced to spend four times longer making deliveries to India than they previously would have shipped goods to the Netherlands, ten times longer than it would have taken to get there in Gdansk, Poland.

The latest round of EU sanctions passed in response to Russian President Putin’s annexation of parts of Ukraine includes a ban on shipping Russian crude anywhere in the world on EU tankers – a escalation which could considerably increase the impact on maritime flows.

Image for representation purposes only.

Some of the sanctions were revised to impose a price cap defended by the US Treasury, after which, from December 5, buyers of Russian crude could use European vessels, insurance and other services, but only if the price at which they are paid is below a certain threshold.

Russia has said it will not sell its oil to anyone who imposes a price cap, threatening that the introduction will lead to a reduction in the country’s production. Major customers are unlikely to approve of such a plan. However, such a mechanism should strengthen the bargaining power of Indian, Chinese and Turkish customers on Russia for their future purchases.

Flows to those three countries that initially helped fill the void after European buyers began shunning exports from Moscow reportedly peaked in June at 2.2 million barrels a day. In the four weeks leading up to October 7, the figure fell by about 320,000 barrels per day.

The volume of tankers whose final destinations have not yet been revealed could reduce the gap; however, this will not happen completely.

While total crude flows shipped from Russia in the week to October 7 appear to have fallen slightly, the four-week average that dampens some noise in the data has gone in the opposite direction. The latest shipments supersede those seen during the week ending September 9, when the passage of Storm Hinnamnor lowered flows from the port of Kozmino.

Crude flow by destination

Overall exports rose slightly on a four-week average, but remained below three million barrels per day for the fourth week; this is the longest since early March that the shipments measure has been below the threshold. The flows catalyzed a rise in Asia which peaked from June.

Figures do not include shipments recognized as KEBCO grade from Kazakhstan. Shipments included those that KazTransoil JSC made that transit through Russia for export via Novorossiysk and Ust-Luga.

Kazakh barrels would be blended with Russian crude to produce uniform export quality. Since Russia invaded Ukraine, Kazakhstan has started renaming shipments to distinguish them from those shipped by Russian companies. Crude in transit is exempt from EU sanctions on Russian maritime shipments, which are expected to come into effect in December.

Russian maritime crude exports to European countries registered a decline in the fourth week, falling to 604,000 barrels per day, the lowest of the year in the four weeks to October 7.

Flow fell about 56,000 barrels per day, or 8%, from September 30. Figures do not include any shipments to Turkey.

The volume shipped to Northern European countries from Russia was flat on average in the four weeks to October 7 compared to the previous week.

Exports to Mediterranean countries reportedly fell in the four weeks to October 7, with fewer shipments to Turkey and Italy. Flows to the region, including Turkey, excluded from the European figures at the top of this section, fell to their lowest since March.

Combined flows to Romania and Bulgaria remained healthy like the records seen the previous week, with an increase in shipments to Bulgaria, offsetting a reduced flow to Romania.

References: Business Insider, Yahoo! Finance

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