Russia increases oil exports, but cargoes accumulate at sea, putting pressure on prices - Bloomberg

Russia is loading its oil onto tankers at an unprecedented pace, but these shipments are accumulating at sea, putting pressure on prices and undermining Moscow's ability to finance the war in Ukraine, Bloomberg reports, writes UNN.

Details

While the country's oil exports have been steadily growing for the second week, unloading cargo is becoming a serious problem. This, combined with an increase in the distance between voyages as vessels reroute from India to China, has led to a 28% increase in the volume of Russian seaborne supplies since the end of August, the publication writes. As a result, the surplus of Russian oil at sea has reached a two-and-a-half-year high, which is one of several factors driving down prices and limiting the revenues needed by the Kremlin to replenish its war chest.

This increase comes amid a rise in seaborne transportation. According to ship tracking data compiled by Bloomberg, Moscow shipped 3.68 million barrels per day in the four weeks ending December 7. This is approximately 220,000 barrels more than in the same period ending November 30, and follows a similar increase in the previous week. The growth was driven by the highest weekly shipments since Russia's invasion of Ukraine in February 2022.

However, the sharp increase in supplies was largely offset by the 10th consecutive drop in oil prices, which resulted in the average four-week seaborne export value for Moscow increasing by only 1%. According to Argus Media, Urals crude supplied from the Black Sea and Pacific ESPO crude traded at their lowest prices since the start of the war. The discount for Urals crude relative to North Sea Dated crude increased to $25.80 per barrel, double the figure immediately before the introduction of the latest US sanctions, the publication writes.

"And Moscow may soon face a retreat from its largest buyer of seaborne oil, at least temporarily. Russian oil imports to India are expected to fall to a nearly four-year low early next year under US pressure. The duration of the retreat will depend on the emergence of workarounds and progress in concluding a trade agreement between the US and India, with New Delhi trying to balance its relations with the two countries," the publication states.

Meanwhile, as noted, Russian oil refineries and export ports continue to be hit, while Moscow continues to bomb Ukraine's gas and energy infrastructure. "There are no signs of a let-up in attacks, and a breakthrough in the US-led peace plan remains unclear," the publication writes.

According to ship tracking data and port agent reports, 38 tankers loaded 29.65 million barrels of Russian oil in the week ending December 7. This volume increased compared to 27.61 million barrels shipped by 35 vessels in the previous week.

On average, daily shipments for the week ending December 7 increased to 4.24 million barrels per day, which is approximately 290,000 barrels per day more than in the previous week, and is the maximum figure since Russia's full-scale invasion of Ukraine. In addition, one batch of Kazakh Kebco crude was shipped from Ust-Luga and Novorossiysk during the week, the publication notes.

The sharp increase in supply volumes was driven by a sharp increase in supplies from Novorossiysk, despite several vessel hits in the Black Sea, and an increase in supplies from the Sakhalin-1 and Sakhalin-2 projects in the Pacific, which is likely related to supply planning rather than an increase in production, the publication indicates.

Export value

On average over four weeks, Moscow's gross export value was virtually unchanged at $1.14 billion per week for the 28 days ending December 7. The increase in export volumes was largely offset by the 10th consecutive drop in average prices.

Based on this indicator, export prices for Russian Urals crude from the Baltic fell by approximately $2.40 per barrel to $41.16, while prices for Black Sea cargoes decreased by $2.80 per barrel to $38.28. The price for Pacific ESPO crude decreased by $1.60 to an average of $52.36 per barrel. Prices delivered to India also decreased by $1 to $57.70 per barrel, which was a new low since March 2023. All prices are according to Argus Media.

The average weekly export volume for the 7 days to December 7 was about $1.27 billion, up 6% from the same period to November 30, amid a jump in exports being partially offset by a slight drop in prices, the publication writes.

Deliveries by destination

Observed deliveries to Russia's Asian customers, including those without a final destination, increased to 3.46 million barrels per day in the 28 days to December 7, compared to 3.27 million in the period to November 30. This is the highest figure since May 2023.

Although the volume of Russian crude oil heading to both China and India appears to be sharply falling, this is mostly offset by an increase in the number on vessels that do not yet have a final destination, which largely reverses this trend, the publication writes. Tankers are increasingly not showing a final destination until they cross the Arabian Sea, while some never show a final destination, even after mooring for unloading.

Reportedly, there is now more oil on tankers that do not yet have a final destination than the combined amount on vessels signaling they are heading to China, India, or Turkey.

The flow of tankers signaling Chinese ports was 740,000 barrels per day in the four weeks to December 7, compared to 960,000 in the period to November 30. The amount destined for India decreased to 880,000 barrels per day from a revised 1.04 million in the period to November 30. But there is an equivalent of 1.84 million barrels per day on vessels that do not yet have a final destination.

Of these, about 1.76 million barrels per day are from vessels from Russia's western ports indicating Port Said or the Suez Canal as their destination, or from Pacific ports without a clear delivery point, and another 80,000 barrels per day are from tankers that do not yet have a destination signal.

In the past, almost all of these cargoes went to India or China, but tougher US sanctions may keep this oil at sea if or until Russian sellers find workarounds, the publication writes.

Flows to Turkey in the four weeks to December 7 increased to approximately 200,000 barrels per day. Deliveries to Syria remained at zero.

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