EU Sanctions Already Crimping Russian Crude Sales to Prime Markets

(Bloomberg) -- European Union sanctions aimed at Russia’s crude exports may be starting to have an impact already, six weeks before they’re due to come into effect.

Seaborne crude shipments from Russia fell to a five-week low in the seven days to Oct. 21, dragging the four-week average down, too.

Reduced volumes, combined with the smallest duty rate on overseas shipments since February 2021, cut the Kremlin’s weekly revenues from crude sales to the lowest since Moscow ordered its troops into Ukraine in February.

At least one of the three countries that helped Moscow to maintain crude exports in the wake of its invasion of Ukraine may be easing back on purchases of Russian barrels, at least for now. While flows to China and India remain stable, two key Indian refiners have halted spot purchases of Russian crude that would arrive after EU sanctions, which will deprive vessels of insurance and other services, come into force on Dec. 5.

Shipments from Russia’s Pacific ports take only a few days to reach Chinese import terminals and the voyage from the Black Sea to Turkey is similarly short. In contrast, shipments to India take several weeks, putting them at greater risk of falling foul of sanctions before they arrive.

The shortest voyages to India, from Russia’s Black sea port of Novorossiysk, takes about two-and-a-half weeks. The voyage time rises to three-and-a-half weeks for shipments to India from the Pacific port of Kozmino and to more than a month from export terminals in the Baltic or on Russia’s Arctic coast.

Time is running out to deliver crude from distant ports to China and India before the EU ban hits. Tankers loading now at Primorsk or Ust-Luga are unlikely to reach discharge terminals in China before that deadline. Shipments to India can probably continue up to about Nov. 7 until they also risk insurance cover ending while they are still on the water.

Flows to China, India and Turkey peaked in June at 2.2 million barrels a day. In the four weeks to Oct. 21 that figure was down by about 330,000 barrels a day. However, the volume on tankers yet to show final destinations remains large, at the equivalent of more than 310,000 barrels a day.

That makes the task of monitoring Russia’s exports more complicated, but most of those vessels end up in India, with a smaller number heading further east to China. But even adding those ships into the calculation shows a drop in the combined flow of Russian crude to Turkey, China and India to a three-week low.

Meanwhile, trading houses and refiners are racing to book storage tanks in Rotterdam in the coming months on expectations of a supply crunch after the EU sanctions take effect. That’s led to an upturn in the volume of Russian crude heading to the North Sea terminal, with flows rising to their highest since early September on a four-week average basis.

Crude Flows by Destination:

Overall exports edged lower on a four-week average basis, slipping from the highest since mid-August but remaining above 3 million barrels a day for a second week. The drop was driven by lower flows to Asia and southern Europe.

All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. These are shipments made by KazTransoil JSC that transit Russia for export through Ust-Luga and Novorossiysk.

The Kazakh barrels are blended with crude of Russian origin to create a uniform export grade. Since the invasion of Ukraine by Russia, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies. Transit crude is specifically exempted from EU sanctions on Russia’s seaborne shipments that are due to come into effect in December.

Crude Flows by Destination:

• Europe

Russia’s seaborne crude exports to European countries edged higher, increasing to 760,000 barrels a day in the four weeks to Oct. 21. Flows were up by 23,000 barrels a day, or 3%, from the period to Oct. 14. These figures do not include shipments to Turkey.

The volume shipped from Russia to northern European countries rose in the four weeks to Oct. 21. All shipments went to storage tanks in Rotterdam, with the flow reaching a six-week high as traders seek to boost stock levels ahead of the Dec. 5 sanctions.

Exports to Mediterranean countries edged lower in the four weeks to Oct. 21.  Flows to the region, including Turkey, which is excluded from the European figures at the top of this section, fell from a five-week high. Shipments to Italy fell, but the volume heading to Turkey remained close to its highest for the year so far.

Combined flows to Bulgaria and Romania gave up the gains seen the previous week. Almost all of the volume heading to customers in the Black Sea ends up in Bulgaria. The country secured a partial exemption from the EU ban on seaborne crude imports from Russia.

• Asia

Shipments to Russia’s Asian customers, plus those on vessels showing no final destination, which typically end up in either India or China, fell for a second week. The volume of crude heading to Asia averaged 1.78 million barrels a day over the four weeks to Oct. 21, with a further 100,000 barrels a day on tankers whose point of discharge is unclear.

All of the tankers carrying crude to unidentified Asian destinations are signaling Port Said or the Suez Canal, with final discharge points unlikely to be apparent until they have passed through the waterway into the Red Sea, at the earliest. Most of those ships end up in India, with some heading to China and the occasional vessel going to other destinations such as Fujairah in the United Arab Emirates, or Colombo in Sri Lanka.

Flows by Export Location

Aggregate flows of Russian crude fell by 290,000 barrels a day, or 9%, in the seven days to Oct. 21, compared with the previous week. The total volume exported by sea fell to its lowest for five weeks, with flows from the Black Sea port of Novorossiysk falling to the lowest since April. Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.

Export Revenue

Inflows to the Kremlin's war chest from its crude-export duty fell by $12 million to $121 million in the seven days to Oct. 21. The four-week average income also dropped, losing $8 million to $137 million. The weekly measure is the lowest since Moscow ordered its troops into Ukraine in February, while the four-week average is the lowest since early March. Receipts have been hit by the combination of lower flows and a drop in the rate of export duty.

At $6.06 a barrel, the export duty rate in October is the lowest per barrel rate since February 2021, according to Bloomberg calculations using figures published by the Russian Ministry of Finance.

Duty rates will fall again in November, dropping to $5.83 a barrel, taking them to their lowest level since January 2021. The Urals discount to Brent widened during the latest calculation period, which ran from Sept. 15 to Oct. 14, compared with the previous one, to stand at about $25.50 a barrel.

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 28 tankers loaded 20 million barrels of Russian crude in the week to Oct. 21, vessel-tracking data and port agent reports show. That’s down by 2.1 million barrels. 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.

The total volume on ships loading Russian crude from Baltic terminals was unchanged, running at 1.25 million barrels a day for a third week.

Shipments from Novorossiysk in the Black Sea slumped to their lowest since the week ending April 1, with just 2 tankers loading cargoes of Russian crude in the seven days to Oct. 21.

Arctic shipments jumped to their highest since Russia’s invasion of Ukraine, with four vessels departing Murmansk in the week to Oct. 21.

Shipments from the Pacific were unchanged in the week to Oct. 21. Eight cargoes of ESPO crude were loaded, all heading to China. A cargo of Sakhalin Blend crude is heading to South Korea. Russia also loaded its first cargo of Sokol crude since May, with the vessel remaining anchored close to the terminal since loading.

Note: This story forms part of a regular weekly series tracking shipments of crude from Russian export terminals and the export duty revenues earned from them by the Russian government. 

Note: All figures have been revised to exclude cargoes owned by Kazakhstan’s KazTransOil JSC, which transit Russia and are shipped from Novorossiysk and Ust-Luga.

Note: Aggregate weekly seaborne flows from Russian ports in the Baltic, Black Sea, Arctic and Pacific can be found on the Bloomberg terminal by typing {ALLX CUR1 }

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