Russian oil on water hits record high as export loadings rebound

Russian oil product exports rebounded to the highest level since the start of its war with Ukraine last March while Moscow's crude flows remained steady above pre-war levels, according to tanker tracking data.

Rising volumes of its oil still in transit suggest, however, that the cargoes are struggling to find buyers.

Russia's oil product export loadings averaged 2.82 million b/d in March, a 24% jump on the month when G7 shipping restrictions on Russian oil were extended to products, and the highest since Russia invaded Ukraine in February 2022, according to S&P Global Commodities at Sea data.

Russian fuel exports to Europe, which accounted for 40% of the region's oil product imports before the war, collapsed in February after the EU banned imports of Russian oil products from Feb. 5. But the data shows Russian product cargoes are increasingly switching tankers at common offshore ship-to-ship transfer locations off Greece, Gibraltar, Malta, and Ceuta. Combined, the four European STS locations saw transfers of some 345,000 b/d of Russian-origin products, obscuring whether the fuel was sold on or remains in transit.

The shipping data shows that Russian product exports headed to Singapore, Turkey, the UAE, China, and Algeria all surged. Collectively, export flows to the destinations rose by 728,000 b/d on the month to absorb more than a quarter of Russia's total product flows. At the same time. flows to Saudi Arabia, Italy, and India fell by 250,000 b/d on the month.

Meanwhile, Russian seaborne crude exports remained resilient in March as Moscow continued to redirect record volumes of its crude to India while the growing gray market in offshore transfers obscured other buyers.

Russian-origin crude loadings averaged 3.4 million b/d during March, little changed from the 3.43 million b/d a month earlier and still above pre-war levels of about 3.1 million b/d in early 2022, the data shows. The steady export loadings come despite Russia's announced 500,000 b/d crude output cut for March in retaliation for the EU's ban and G7 price cap on seaborne imports of Russian crude.

Combined, total Russian oil export loadings averaged 6.22 million b/d in March, according to the data, some 300,000 b/d above pre-war levels of 5.9 million b/d.

Oil on water

Although Russian oil export loadings have risen, the tanker data shows that the pace of cargo discharges has fallen sharply over the month as cargoes are routed to more distant buyers and growing volumes of tankers load Russian oil without a destination. As a result, Russian oil on water continues to build as barrels seek buyers at sea, engage in STS activity, and traverse longer routes. Russian oil on water has now almost trebled year-on-year, according to CAS, with crude oil making up the bulk of Russian oil on water growth.

As of March 30, Russian crude on water stood at a record 97 million barrels, up from 67 million barrels at the start of the year and just 27 million barrels at the start of 2022. Including Kazakhstan's CPC Blend, total Russian-loaded oil on water stood at 133 million b/d on March 30, the data shows.

"Higher exports and disruptions to trade flows due to the rerouting of Russian oil to new destinations have significantly increased oil in transit," The International Energy said in its March 15 oil market report. "The increase in Russian petroleum products was around 20 [million barrels] or 30%, but this will likely grow as the impact of the EU petroleum product embargo comes into full effect."

For now, at least, resilient Russian oil exports have resulted in only a minor impact on upstream production. Russian oil production reached pre-conflict levels above 11 million b/d in February, according to analysts at S&P Global. S&P Global expects Russian crude and condensate supply to bottom at 10.46 million b/d in April, rise back to 120,000 b/d by June, and grow another 260,000 b/d by the end 2023 as more buyers are found and logistical hurdles from the EU product ban are overcome.