Page 8 - FSUOGM Week 10 2023

FSUOGM COMMENTARY FSUOGM

Russia's oil product exports

slumped by 20% in February

Seaborne exports remained robust, however, reflecting Russia's success in
diverting cargoes from Europe to Asia.

RUSSIA RUSSIA'S oil product exports have slumped by ships to export all its crude, it remains moot as to
20% in February, marking their lowest level since whether it has enough to transport all its prod-
WHAT: May 2022, according to tanker tracking data, ucts. Russia imposed a 500,000 bpd production
Russian oil product reported S&P on March 2 in a note. Shipborne cut that went into effect on March 1, to either
exports fell 20% in exports of crude, however, have held up well and compensate for falling demand or to push up
February, remain robust. prices – it is not yet clear which reason drove the
“Russia-origin seaborne oil product exports decision to cut back on output.
WHY: averaged 2.13mn barrels per day in February, “The shipping data shows that Europe's
The slump follows the a 21% slump from recently elevated levels of imports of Russian fuels slumped sharply in Feb-
West's introduction of an around 2.7mn bpd in January and 24% below ruary. So-called "grey" market trade continues,
embargo and price caps. average pre-war levels, according to S&P Global however, albeit at reduced rates, with tankers
Commodities at Sea data,” the consultant said. discharging Russian fuels at common offshore
WHAT NEXT: Analysts are watching the export volumes of ship-to-ship transfer locations off Greece,
The long-term impact Russia’s oil products closely after they became Gibraltar, Malta and Ceuta,” S&P said.
of Western sanctions embargoed on February 5. Last year Russia Western efforts to curb Moscow's oil reve-
remains to be seen. successfully reorientated all its export of crude nues mean EU countries have been importing
to customers in Asia – primarily Indian and oil from other sources. This decline in exports
China – after the EU reduced its oil imports to comes as new buyers in Africa fail to absorb Rus-
almost nothing in anticipation of a crude import sian fuels displaced from Europe.
embargo that came into effect on December 5. “To help plug the gap in Europe, regional
Crude exports initially slumped after the start of refiners and fuel retailers continue to lean on
the war as Western oil traders self-sanctioned and alternative diesel supplies from the Middle East,
stopped buying Russia’s Urals blend, but the mar- Turkey and the US, while dipping into stocks in
ket quickly adjusted within a few months, as Russia the Amsterdam-Rotterdam-Antwerp refining
found new customers. Instead of the week it takes hub built up ahead of the embargo,” S&P said.
to ship oil from Russia’s main oil export terminal in The data shows that Europe's flows of Russian
Primorsk to Rotterdam in the Netherlands, it takes fuel have plunged from around 1.5mn bpd in
a month for tankers to travel to Asia and back, so the December to less than 500,000 bpd in February.
market took two months to rebalance. Meanwhile, African buyers in Morocco, Algeria,
Pulling off the same trick with oil products Nigeria, Senegal, Tunisia, Ghana and Egypt have
will be more difficult as products like Russia’s doubled their Russian fuel imports to around
diesel fuel are much more widely distributed, 440,000 bpd.
and Russia is now in competition with its own As a result, Russia's share of European oil prod-
crude exports as potential customers are refining uct imports has sunk to just 7.5% in February, down
more cheap Russian crude, which reduces their from pre-war levels of 39%, according to the data.
need for imports. Elsewhere, Turkey, the UAE and China have
“The largest impact has been felt in the diesel
and fuel oil markets, Russia's biggest fuel exports
and revenue earners. Russian diesel exports
slumped by more than 100,000 bpd in Febru-
ary to 830,000 bpd, while fuel oil exports slid by
some 170,000 bpd on the month to 614,000 bpd,
the data shows,” S&P said.
There is also a logistical question mark over
Russia’s ability to find enough shipping capac-
ity to carry all its production to overseas mar-
kets. Russia has built up a large “ghost fleet” but
estimates of its size vary from 100 ships to 600.
While it is clear that Russia already has enough

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