RUSSIAN OIL EXPORTS DOWN

PLATTS - 03 Jan 2023 - Russian seaborne crude exports fell to a two-year low in December, according to tanker tracking data, as Moscow struggled to redirect to Asia oil displaced by sanctions in European and G7 countries.

Russian-origin crude loadings from Russian ports averaged 2.65 million b/d in December, down 431,000 b/d, or 14%, from November levels, according to data from S&P Global Commodities at Sea.

The G7's $60/b price cap on Russian crude and the EU's own embargo on seaborne Russian crude came into effect on Dec. 5 in response to the invasion of Ukraine. The price cap and EU embargo will extend to Russian oil product exports starting Feb. 5.

Russian crude export flows fell across the board, the data showed, with exports also falling to China, India and Turkey, which have become Moscow's biggest oil buyers since the war in Ukraine.

India remained the top destination for Russian seaborne crude with 1.1 million b/d of imports but sharply lower flows to Turkey saw Bulgaria become the third biggest buyer of Russian crude in December. Exports registered as delivered to South Korea, a common location for offshore ship-to-ship transfers, slipped to 93,000 b/d.

With more than 300,000 b/d loaded from Russian ports since Dec. 1 still heading to unknown destinations, the data showed Russia sent at least 71% of its seaborne crude exports to Asia in the period, up from 26% before the war in Ukraine.

The remaining shipments of Russian crude to the EU were mainly to Bulgaria -- which has an exemption from the EU's embargo on Russian crude -- and to Gibraltar and Greece, also common trans-shipment locations via STS transfer.

Flows to Italy, home to Lukoil's 320,000 b/d ISAB refinery in Sicily, stopped in December, the data showed, after more than halving on the month to average 141,000 b/d in November.

Shadow fleet

Russia said Dec. 28 it will ban crude supplies to countries that observe the G7's $60/b price cap from Feb. 1 for five months. The retaliatory move, which applies at all stages of supply to the final buyer, had been widely flagged by Russia and expected by the global oil market.

It remained unclear, however, the extent of Russia's access to the so-called 'shadow', or unregulated tanker and shipping markets which could transport some of its oil exports under the radar of the G7 price cap.

Since Dec. 5, mainstream tankers have largely shunned lifting Russian barrels and now only account for around one in every 10 listings, according to BRS Group shipping brokers. But Russia could still find sufficient shadow tankers to export its crude displaced from Europe, BRS said.

Analysts at S&P Global Commodity Insights expected only minimal impact from the West's seaborne crude sanctions on Russian output, forecasting its crude and condensate production will fall just 160,000 b/d month on month in December. Russian supply losses could peak at 930,000 b/d below pre-war levels in March, however, due to pending sanctions on fuel exports before production rebounds 400,000 b/d by Q4 2023, according to S&P Global.

Russian estimates that its oil output may fall 5%-7% in 2023 as a result of the sanctions.

Product exports

The tanker data shows that Russian oil product exports in December were little changed on the month at 2.69 million b/d, down from 2.71 million b/d in November, and on par with pre-war levels.

Turkey overtook Greece to become the biggest buyer of Russian oil products, importing record volumes of jet, diesel/gasoil, VGO, and LPG in the month, the data shows. Product exports also doubled to Singapore, a refining and common reblending hub for fuel. More than 300,000 b/d of Russian oil products continued to flow to the Netherlands and Belgium, home to Europe's main refining hub, down from pre-war levels of around 480,000 b/d.

Germany and Poland also halted imports of Russian crude via the Druzhba pipeline as of January 1 after an earlier deal that allowed seaborne crude into Poland to supply enough crude to the Schwedt refinery to run at around 70% capacity. Germany has committed to increasing the capacity of its Rostock port on the Baltic Sea and the Rostock-Schwedt oil pipeline, which supplies the Schwedt refinery.

Kazakhstan's oil pipeline operator KazTransOil said Dec. 30 it has asked Russia to transit 1.2 million mt of Kazakh oil for delivery to Germany in 2023.

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