Page 32 - RusRPTMar23

2.8 The geography of Russian oil supplies limits tanker traffic capacity
The geography of Russian oil supplies has radically changed due to the European oil embargos and limits Russia's ability to bypass the price ceiling.
Bloomberg reports that the average distance of oil transportation from the Baltic ports increased from 3,000 to 9,000 miles over the past year due to the fact that Russia has almost completely lost the European market.
This explains the drop in the share of Russian tankers from 37% in December (the first month) to 18% in January and the increase in the share of European tankers from 26% to 36%. The fact is that Russian tankers that left the Baltic for India after the start of the embargo on December 5 simply have not had time to return yet. The round-trip journey to the west coast of India takes 66 days, to the east - 74, and to the ports of China - 123 days.
In January, Russia sent a total of 91 tanker shipments from the Baltic, Arctic and Black Sea ports, of which 68 went to India and nine to China. To maintain this level of shipments, taking into account transit time, a fleet of 203 tankers is needed - 162 Aframax class (up to 700 thousand barrels) and 41 Suezmax class (up to 1mn barrels). A year ago, 90% of oil from the Baltic ports went to the EU countries, and tankers worked on a short arm.
The state-owned Sovcomflot has only 10 Suezmaxes and 32 Aframaxes, “which is absolutely not enough to transport all the oil from the western ports of Russia” - even taking into account the “shadow” fleet, Bloomberg states. Thus, the refusal of European vessels (which do not have the right to accept oil more expensive than the price ceiling - $60) is impossible.
The IEA reported on February 15 that in January Russia received $13bn from oil exports - a little more than in December, but 36% less than in January 2022.
Exports of oil and oil products amounted to 8.2mn b/d (more than in December), while production (about 9.8mn b/d) was only 160 thousand b/d lower than in January 2022. But due to a sharp decline in the cost of Urals oil (to $49.48 in January), tax revenues from production fell by 48% y/y, to 310bn rubles.
Limiting the discount on Urals oil (from July to no more than $25 per barrel) for tax purposes will allow “preserving budget revenues” by 660bn rubles in 2023, Deputy Finance Minister Alexei Sazanov said on February 15. The cost of Urals in the first half of February remained below $50 ($49.11), which means a discount to Brent at $33.7.
Double European sanctions against Russian oil, as the first two months have shown, work for purely geographical reasons - even when there are buyers for it.
The oil products market is structured differently, and it is possible that diesel fuel will have to be transported even further. We have detailed what to expect from the embargo and the price ceiling for petroleum products, which came into effect on February 5, here. A separate question is how to transport oil
32 RUSSIA Country Report March 2023 www.intellinews.com