Russia’s seaborne oil flows look as if they are moving higher. Two possible explanations: the nation is pushing more cargoes onto the water after Germany and Poland all but halted piped imports, and Moscow has one eye on an impending ban on fuel purchases by the European Union.
Russia’s crude exports rebounded in the seven days to Jan. 27, recovering most of the previous week’s loss. Aggregate volumes rose by 480,000 barrels a day, or 16%, to 3.6 million in the week. Shipments from Baltic and Pacific ports were both up by 310,000 barrels a day from the previous week, with the increase partly offset by a decline in volumes from the Arctic.
Russia has already lost its key European market for crude and is about to do the same for refined products — an EU import ban is due to come into force on Feb. 5. Like the earlier embargo on crude, it will be accompanied by a price cap mechanism, intended to allow flows to continue to non-European buyers as long as cargoes are purchased below yet-to-be agreed prices. Some analysts question whether Russia will be able to find buyers for the fuel cargoes Europe doesn’t take, creating questions about where that would leave the nation’s refining industry.
Russia introduced a new formula to calculate per-barrel export duty rates at the beginning of January, halving the rate of duty payable at any given crude price. Four-week average receipts have fallen sharply as successive December periods have dropped out of the calculation. A separate line in the chart below shows what the Kremlin’s receipts from crude export duty would have been had the 2022 formula continued to apply.
President Putin has demanded his government come up with a plan for re-jigging Russia’s oil levies to offset the effects of sanctions on the nation’s budget revenues. Officials were asked to prepare suggestions for a new method of assessing prices of Russian crude and products, used to set duty rates, by March 1.
The January duty rate is $2.28 a barrel, based on an average Urals price of $57.5 a barrel, according to figures from the Russian Ministry of Finance. The per barrel rate for February will be even lower, at $1.75 a barrel. That’s down by 23% from January and the lowest per barrel rate since June 2020, during the depths of the Covid 19 pandemic. The drop is the result of a decline in Urals prices over the measurement period, which ran from mid-December to mid-January. Russia’s benchmark grade averaged $46.82 a barrel according to ministry figures, a discount of almost $35 a barrel to Brent over the same period.
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 34 tankers loaded 24.9 million barrels of Russian crude in the week to Jan. 27, vessel-tracking data and port agent reports show. That’s up by 3.4 million barrels, or 16%, from the previous week. 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.
