December 9, 2022

WWW.ENERGYINTEL.COM

Russian Exports: Crude Touches 1-Year Low, Products Rise

  • Ahead of the EU embargo, Russia’s exports of crude oil and gas condensate in November sunk to a one-year low of 4.6 million b/d.
  • Exports of petroleum products, however, touched a nine-month high as Europe loaded up on diesel and Russia boosted gasoline exports to record levels.
  • Russia’s exports of diesel and naphtha are scheduled to grow further in December.

Russia exported 4.6 million barrels per day of crude oil last month, a decline of 70,000 b/d from October and nearly 700,000 b/d from the 2022 high of 5.4 million b/d in May. The last time oil exports were this low was in November 2021, when Russia was still under Opec-plus restrictions and refining runs were considerably higher.

Exports of oil products, by contrast, grew healthily to nearly 2.8 million b/d in November, up 80,000 b/d on October, according to shipping data. This was the highest level for product exports since February, when they were 3.1 million b/d.

Motor fuel sales were the core driver for the monthly gain. Combined deliveries of gasoline and diesel surged by 235,000 b/d to 860,000 b/d — partly the result of a fall in Russian domestic demand.

Aggregate fuel exports in November amounted to 7.4 million b/d, which is flat compared to October.

Created with Highcharts 9.0.0('000 b/d)REFINING STEADY WHILE CRUDE EXPORTS FALLProduction, Crude + CondensateRefining ThroughputExportsJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '222,0004,0006,0008,00010,00012,000Source: Energy Intelligence

Crude Stumbles on Eve of Ban

November marked the third month straight that Russia’s crude exports have fallen.

In the March-October 2022 period, crude exports averaged 4.95 million b/d, which is 660,000 b/d higher than the same period of 2021.

Although production of crude and condensate rose in November to 10.88 million b/d, up 120,000 month on month, Russia struggled to get oil to the market in the countdown to the Dec. 5 EU embargo.

Discounts widened quickly. Official Russian data this week indicate that Urals was priced in Rotterdam as low as $46, or a $35 discount to dated Brent.

Shipments via the Druzhba pipeline dipped to 590,000 b/d, a level last seen during the pandemic, as Germany and Poland tapered imports in the run-up to the ban. Exports from the Black Sea plummeted to 340,000 b/d, down from 610,000 b/d in August, while those from the Baltic Sea ports rose by 100,000 b/d to 1.33 million b/d.

Created with Highcharts 9.0.0('000 b/d)EU LOWERS RUSSIAN CRUDE IMPORTS, NOT PRODUCTSTotalProductsCrudeYear 2021Jun'22Jul'22Aug'22Sep'22Oct'22Nov'2201,0002,0003,0004,000Source: Energy IntelligenceJun'22 Products: 1,115

November exports were buoyed by a nearly 100,000 b/d increase in shipments from Sakhalin-1, which Rosneft has been ramping up since September after Exxon Mobil departed the project earlier this year as a result of the war in Ukraine.

Output at the former production-sharing agreement, all of which is exported to Asia, amounted to 138,000 b/d, compared with 200,000 b/d prior to Exxon’s departure, pointing to possible growth.

Created with Highcharts 9.0.0('000 b/d)('000 b/d)RUSSIA STRUGGLES TO KEEP EXPORTS FLOWINGCrude Exports (Left)Product Exports (Right)Nov '21Jan '22Mar '22May '22Jul '22Sep '22Nov '222,0003,0004,0005,0006,0008001,6002,4003,2004,000Source: Energy IntelligenceJanuary 2022 Product Exports (Right): 3,056

Products Flow Freely

While crude exports have been on a slide since August, those of petroleum products have been on an ascent over the same three months.

In the March-October 2022 period, product exports were 2.55 million b/d compared to 2.74 million b/d during the same period of 2021 — a drop of 190,000 b/d.

In November, by contrast, product exports reached 2.8 million b/d, according to preliminary shipping data, up 300,000 b/d since August. Over the same three months refining runs were up only 80,000 b/d, indicating that the surplus in products is getting sold abroad. Some products may be sold out of storage, but tank storage capacity is limited.

In September, Russia called up 300,000 reservists, which consequently triggered a mass flight of men, around 700,000, to neighboring countries. This means that approximately 1 million men have been removed from the economy, and the impact on domestic demand — particularly for gasoline and jet fuel — has been profound.

Gasoline has been doubly impacted by a reduction in the subsidy paid to refiners for domestic sales, the result of which the margin for this product has plummeted. Left with little alternative, oil companies are exporting greater volumes.

In November, gasoline exports amounted to 185,000 b/d, a twofold increase on September and a multiyear high. Destinations for these barrels are increasingly exotic: Swiss-based Gunvor is shipping at least two November cargoes to United Arab Emirates, according to ship-tracker Kpler, and this month Nigerian trader Sahara Energy E&P is hauling large volumes of Rosneft gasoline transshipped via Latvia. Other destinations for Russian gasoline include Ghana and Argentina.

Created with Highcharts 9.0.0('000 b/d)RUSSIAN GASOLINE OUTPUT/EXPORTSGasoline OutputDomestic DeliveriesExportsJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '2202505007501,0001,250Source: Energy IntelligenceMarch 2022 Exports: 121

Exports of other light products touched eight-month highs in October, Energy Intelligence’s data shows. Naphtha exports for that month were nearly 500,000 b/d, the largest since February, while liquefied petroleum gas deliveries abroad amounted to 380,000 b/d.

By contrast, jet fuel exports in October were 36,000 b/d, down a quarter from February, and are estimated to have fallen further to 30,000 b/d in November as refineries slash this part of the slate on the backdrop of a fall in demand for domestic air carriers.

Meanwhile, exports of dirty products — fuel oil (M-100), heavy gasoil, bunkering fuel, vacuum gasoil — comprised 920,000 b/d in October, an increase of nearly 100,000 b/d compared with September and a high from February. This is the inevitable result of high refining runs: due to a low conversion rate, the more crude Russia processes, the more heavy residues result.

Fuel oil-dependent countries like Malta are loading up on Russian fuel oil, while opportunistic buying by the UAE, India, and Singapore are also on this rise, according to shipping data.

Diesel’s Last Stand?

Exports of diesel, a kind of bellwether for Russia’s refining industry, are slated to reach 750,000 b/d in December, according to a source familiar with the schedule. This would be the highest level since March, when the country exported 780,000 b/d, according to official data. Month on month, the increase would amount to 100,000 b/d.

Shipping data indicate that Europe, including Turkey, snatched up nearly 90% of Russia’s diesel exports in November. Kpler data indicated the EU took 650,000 b/d out of 750,000 b/d coming from Baltic and Black seas. Clearly EU countries are loading up on diesel, supplies of which remain tight globally, in the less than two months remaining before the import ban on Russian petroleum products.
Created with Highcharts 9.0.0('000 b/d)RUSSIAN DIESEL OUTPUT/EXPORTSRefinery OutputDomestic DeliveriesExportsJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '2205001,0001,5002,000Source: Energy Intelligence

Gary Peach, New York