Russia Registers A Loss Of 60% Of Its Seaborne Crude Market In Europe

Russia has reportedly lost three-fifth of seaborne crude sales in Europe since Russia invaded Ukraine in February 2022. That market is expected to vanish in eight weeks, and the most recent sanctions will make it difficult to divert the flows elsewhere.

Crude shipments to Europe registered an average of 630,000 barrels per day in four weeks up to 7 October, down from the 1.62 million figure registered before the invasion.

Tankers loaded with Russia’s oil are forced to spend four times as long making deliveries to India as they’d earlier have done shipping cargo to the Netherlands, or ten times as long as it’d have taken to get to Poland’s Gdansk.

The EU’s most recent round of sanctions passed in response to Russian President Putin’s annexation of parts of Ukraine includes a ban on shipping Russia’s crude anywhere in the world on the EU tankers — an escalation that may significantly boost the impact on the seaborne flows.

Some of the sanctions have been revised to place a price cap that is championed by the US Treasury, following which, from 5 December, Russian crude buyers might use European vessels, insurance, as well as other services, but only if the price they are required to pay is lower than a certain threshold.

Russia has said it will not sell its oil to anyone who imposes a price cap, threatening that the introduction may result in the country cutting its production. The primary customers are unlikely to endorse such a plan. Yet, such a mechanism is expected to enhance the bargaining power customers in India, China, and Turkey have on Russia for future purchases.

Flows to those three nations that initially participated in filling the gap after the European buyers started shunning Moscow’s exports reportedly peaked in June at 2.2 million barrels each day. In the four weeks that led to 7 October, the figure was down by approximately 320,000 barrels per day.

The volume of tankers yet to reveal the final destinations may narrow the gap; however, it will not get done with it completely.

While the total crude flows shipped from Russia in the week that leads to 7 October seems to have edged lower, the four-week average that smoothes out some noise in the data went in the opposite direction. The latest shipments supersede those observed in the week that ended on 9 September, when the Storm Hinnamnor passage lowered the flows from the port of Kozmino.

Crude Flows by Destination

Overall exports edged higher on a four-week average but remained below three million barrels per day for the fourth week; that is the longest since early March that the measure of shipments has been beneath the threshold. Flows catalysed an increase in Asia that rose to the highest from June.

The figures do not include cargoes recognised as Kazakhstan’s KEBCO grade. The shipments included those that KazTransoil JSC made that transit Russia to export via Novorossiysk and Ust-Luga.

The Kazakh barrels are reportedly blended with Russian crude to produce a uniform export grade. Since Russia invaded Ukraine, Kazakhstan started rebranding cargoes to distinguish them from the ones shipped by Russian firms. Transit crude is exempted from the EU sanctions on Russian seaborne shipments, expected to be effective in December.

Russia’s seaborne crude exports to European nations registered a drop in the fourth week, dropping to 604,000 barrels per day, the lowest for the year in the four weeks to 7 October.

The flow dropped by approximately 56,000 barrels daily, or 8%, from 30 September. The figures do not include any shipments to Turkey.

The volume shipped to northern European nations from Russia remained unchanged on average in the four weeks to 7 October compared to the week before.

Exports to Mediterranean nations reportedly slumped in the four weeks leading to 7 October, with a drop in the number of shipments to both Turkey and Italy. Flows to the region, including Turkey, excluded from the European figures at the top of this section, fell to their lowest from March.

Combined flows to Romania and Bulgaria remained sane as the records observed the week before, with increased shipments to Bulgaria, thereby offsetting a reduction in the flow to Romania.

References: Business Insider, Yahoo! Finance