Page 113 - bneIntelliNews monthly country report Russia May 2024

Russian crude STS activity (excluding CPC Blend & KEBCO) reached 310kbd in April (days 1-15), a 120kbd increase m/m and a 10-month high. Russian Urals is the sole grade transferred via STS in April so far, which has reached a 12-month high. VLCCs have been the driving force behind Russian Urals STS activity moving upwards in recent months, especially in April. More than 60% of the Urals transferred in April were because of VLCCs loading via STS from Aframaxes, which increased the STS volumes (three Aframaxes feed one VLCC). These STS operations took place offshore Kalamata (Greece) and Port Said (Egypt). The economies of scale incentivise STS transfers of Russian crude from smaller sised tankers to VLCCs, which will travel further (most likely East) as opposed to sending Aframaxes to sail directly (which would result in less tonnage availability near Russian ports). The VLCCs can either sail via the Cape of Good Hope if fully laden or via the Suez Canal if half-laden. It’s important to note there have been no STS transfers of Sokol in April so far, the first time this occurred since October 2022. This is likely a function of US sanctions on Sovcomflot tankers, which were transferring Sokol in Q4 before entering floating storage due to issues with buyers. Since these tankers discharged Sokol in China in March, they have been left largely idle, bringing STS volumes of Sokol down with them.
VLCC profiles suggest spare capacity in the opaque fleet In 2024 so far, we have observed nine VLCCs transfer Russian crude via STS. All nine of these VLCCs have previously been involved in Iranian and/or Venezuelan trade (the latter being whilst under sanctions/before 18th October 2023). They average 20 years old (the same average age observed when offshore Ceuta became a STS hotspot in 2023) with the oldest tanker being 24 years old. Five of the nine VLCCs are Panama-flagged. This return of VLCCs to the Russian trade, specifically these tankers involved in the sanctioned trade, suggests there is surplus tonnage in the VLCC segment of the opaque fleet. When the US lifted sanctions from Venezuela temporarily in October, there was idle VLCC tonnage which found its way into Russian trade, especially because Merey was no longer trading at deep discounts. Iran’s VLCC fleet has also doubled since 2021, with spare capacity available for switching into the Russian trade whilst sustaining its own crude/condensate exports.
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China’s seaborne crude imports surged above the 10mbd mark in March, marking the first time since October 2023, albeit with an 8% y/y decrease, buoyed by record Russian barrels. The month saw a 280kbd increase in crude imports, while onshore crude inventories rose by 2.5mb (or 80kbd), indicating a moderate pickup in monthly crude throughput. However, this implied throughput increase of 200kbd is notably lower than the 650kbd and 1.17mbd recorded in the same period in the past two years, reflecting subdued oil demand below seasonal norms.
113 RUSSIA Country Report May 2024 www.intellinews.com