January 12, 2023

WWW.ENERGYINTEL.COM

Russian Exports: Great Migration of Crude, Products Is Under Way


  • Russia’s oil exports in December sunk to a 16-month low of 4.34 million b/d as shipments out of the Baltic Sea plummeted.
  • Exports of petroleum products touched a 10-month high of about 3 million b/d as Europe stockpiled diesel ahead of the Feb. 5 embargo.
  • Data for the first week in January show a sharp decline in pipeline shipments to Europe, while exports to Asia are ramping up.

The crude oil and refined products embargoes by the EU are having a discernible impact on Russian flows.

In December, when the crude ban went into effect, exports of crude declined by 500,000 barrels per day from the January-November average to 4.34 million b/d, according to a source familiar with official data.

However, export of products last month were approximately 3 million b/d, based on shipping data and Energy Intelligence’s assessment, or nearly 300,000 b/d more than the average during the preceding 11 months.

More dynamism is expecting from the start of 2023 now that Germany and Poland are ceasing pipeline crude imports and Europe will ban product imports in early February.

Created with Highcharts 9.0.0('000 b/d)('000 b/d)RUSSIA CRUDE EXPORTS END 2022 ON LONG SLIDECrude Exports (Left)Product Exports (Right)Nov '21Jan '22Mar '22May '22Jul '22Sep '22Nov '2201,5003,0004,5006,0002,2502,5002,7503,0003,250Source: Energy Intelligence

Oil Exports Falter

Russia’s exports of 4.34 million b/d last month represent a decline of 260,000 b/d on November, with the big surprises coming from the Baltic Sea and Druzhba pipeline.

Aggregate seaborne exports from the Baltic ports of Primorsk and Ust-Luga amounted to 1.05 million b/d, a nearly 300,000 b/d decline compared with November and the lowest since August 2021. Reports indicate that Indian buyers, who now snap up the bulk of Primorsk cargoes, backed off buying in December while haggling over price.

January offtakes, by contrast, are looking rosier for Russia, according to preliminary data, though pricing agencies are assessing the Urals grade at sub-$40 per barrel — pointing to acute financial problems for Moscow.

Shipments via the 1 million b/d Druzhba pipeline, meanwhile, jumped 90,000 b/d month on month to 680,000 b/d as Poland and Germany stockpiled crude ahead of their common pledge to end pipeline imports by year’s end. The EU granted an exemption for imports of Russian crude to inland refineries, but Germany and Poland vowed to cease these purchases by the end of 2022.

Official data for the first week of January, seen by Energy Intelligence, show that Germany and Poland have stopped Druzhba offtakes. Given that crude deliveries to these two countries averaged 490,000 b/d last year, this amounts to nearly 15 million barrels of stranded oil per month — or the equivalent of 15 Suezmaxes — that Russian producers such as Rosneft are having to shift to tankerage.

Early January data shows that pipeline shipments to China have approached 900,000 b/d, the highest level in years, while seaborne exports out of the Far East are also close to 900,000 b/d, pointing to a new record.

Created with Highcharts 9.0.0('000 b/d)EXPORTS DROP AT YEAR'S END AMID STEADY OUTPUTProduction, Crude+CondensateRefining ThroughputExportsJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '2202,5005,0007,50010,00012,500Source: Energy Intelligence

Europe Soaks Up All Diesel

Exports of petroleum products are estimated to have reached 3 million b/d in December, based on shipping and Energy Intelligence data. This is the highest since February, when these exports were 3.13 million b/d.

Diesel exports soared during the month, reaching 740,000 b/d, according to official Russian data, as European traders loaded up on Russian products ahead of the Feb. 5 embargo. This was the most since March, and 50,000 b/d more than the average for all 2022.

In fact, Europe, which gets every tenth barrel of its diesel from Europe, imported all of Russia’s diesel exports last month, scoring in the process a record-setting haul, based on data from ship tracker Kpler.

Not including Turkey, Europe imported 560,000 b/d of Russian diesel in December. This is 60,000 b/d more than the average for the entire year.

Diesel, in other words, accounted for half of all Europe’s imports of refined products from Europe.

Germany was the single largest offtaker of Russian diesel for the month, importing 195,000 b/d, followed by Turkey, which took 180,000 b/d. France imported 85,000 b/d, according to shipping data.

For 2022, France and Germany were Russia’s largest diesel clients – importing 135,000 b/d and 100,000 b/d, respectively. Turkey was third at 80,000 b/d.

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 '22Dec '2205001,0001,5002,000Source: Energy Intelligence
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 '22Dec '2202505007501,0001,250Source: Energy Intelligence

Twilight of Russian Products?

Russia is the world’s second-largest products exporter after the US. Last year it exported an estimated 2.75 million b/d, down an approximate 100,000 b/d compared with 2021.

But given Russia’s dependence on Europe — its refineries were, in fact, calibrated to supply Europe with products — the outlook for product exports is grim.

Europe, after all, imported 1.4 million b/d in December, including Turkey, or nearly half of all products exports. This is roughly the same level as November but more than the average of 1.2 million b/d in August-October, according to Kpler data.

Minus Turkey, which has ramped off imports of Russian products in recent months, and transshipments through the Baltic countries, Europe imported about 1.1 million b/d in December, or about 100,000 b/d less than the average in the first 11 months of the year.

Russia, in other words, is facing 1 million b/d of stranded petroleum products, which will now have to travel further to reach clients, whether in the Mideast, Africa, or South America.

Netbacks are already squeezed due to shipping costs and discounts, and although it is possible Moscow could come to the rescue with relief on taxes and transit costs, this will unlikely be enough to prevent a sizable decline in refining throughput — and hence, product exports — this year and beyond.

Created with Highcharts 9.0.0('000 b/d)EU CRUDE IMPORTS FROM RUSSIA ON THE WANETotalProductsCrudeYear 2021Jun'22Jul'22Aug'22Sep'22Oct'22Nov'22Dec'2201,0002,0003,0004,000Source: Kpler, Energy Intelligence

Gary Peach, New York