Russian oil exports hit 11-month low as refinery downtime, output cuts bite

Russian seaborne oil exports fell to an 11-month low in August, according to tanker tracking data, as heavy refining maintenance hit oil product exports, and output cut pledges and Black Sea tensions continued to limit crude flows.

Total Russian shipped crude and oil product exports averaged 5.27 million b/d, the lowest since September 2022, and 650,000 b/d below pre-war levels, according to S&P Global Commodities at Sea data.

Russia-origin seaborne crude shipments averaged 3 million b/d in August, little changed on the month, but about 800,000 b/d lower compared with the April–May average and below the average pre-war levels of 3.1 million b/d, CAS data showed. Crude shipments to India, currently Russia's biggest oil buyer, fell to a six-month low in August, the data showed, while flows of Russian crude from the Black Sea also slumped amid heightened military tensions in the area. Higher crude shipments, however, via Russia's Baltic and Arctic shipping routes offset the lower Black Sea flows. Additionally, Russia's oil product exports fell to a 10-month low of 2.27 million b/d, the data showed, down from a post-war high of 3 million b/d in March, as the country's refineries remained at high levels of seasonal maintenance.

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The export slump since May also comes as the market looks to gauge Moscow's compliance with its pledge to cut exports by 500,000 b/d in August to help support global oil prices. Additionally, Moscow has promised to cut its crude exports by a further 300,000 b/d in September, a move expected to tighten the sour crude oil market further.

Russia had already promised to cut its crude output by 500,000 b/d from March to the end of the year, but most market watchers did not expect Russia to follow through given its surge in export volumes earlier in the year. Analysts at S&P Global Commodity Insights assume that Russian crude oil production will remain at around 9.4-9.5 million b/d through 2024.

Price caps

Spot prices for Russia's key Urals export crude grade have been trading above the G7's $60/b price cap since July 11. Although discounts for Russian crude have continued to shrink over recent months as Russia sources more non-G7 shipping capacity to sidestep G7 price caps on its exports, values for medium, sour crudes continue to strengthen globally.

Urals crude delivered to India's west coast priced against Forward Dated Brent narrowed to a $5.65/b discount Aug. 23, the tightest spread since Platts, part of S&P Global Commodity Insights, began assessing the differential at $19/b Jan. 18. Urals bought on an FOB basis at the Baltic port of Primorsk was assessed by Platts at $74.69/b Sept. 1, as its discount to Dated Brent more than halved since the start of the year to around $15/b.

Russian diesel exports were also being sold above the G7's price cap in early August, according to market watchers, in a move raising further questions over Russian oil export flows as they test Western efforts to crimp Moscow's war revenue.

However, tighter enforcement of the price caps is seen as unlikely for now, with global crude prices pushing toward year highs of $90/b amid a looming supply shortfall later this year.

"The US government's desire to keep fuel prices in check is allowing more supply on the market. The US has shown little appetite to risk actions that reduce Russian oil flows," analysts at S&P Global Commodity Insights said in an Aug. 28 note.

Under the G7's price cap on Russian oil exports, G7 and EU tanker operators and insurers have been barred from offering services for vessels carrying Russian oil products that trade at a premium to crude, such as diesel, for more than $100/b since Feb. 5. A lower $45/b price cap covers Russian oil products that trade at a discount to crude, such as fuel oil.

Product exports

It remains to be seen if Russian oil product prices exceeding the G7's price caps have hampered Russia's ability to source enough non-Western tankers to maintain export flows. In the case of crude, most market watchers believe Russian access to a growing fleet of non-G7 insured, shadow tankers has been sufficient to move the exports to alternative markets in Asia, the Middle East and Turkey.

The August fall in product exports, however, comes amid reduced Russian domestic refining capacity due to scheduled plant maintenance.

According to S&P Global Commodity Insights, refinery downtime in the Former Soviet Union region increased by 310,000 b/d in the week ended Aug. 25 to 1.06 million b/d and is expected to have remained around the same level during the final week of August. Russian diesel supply tightened last month forcing the Russian energy ministry to prioritize the domestic agriculture and consumer sectors, S&P Global reported previously. Railway transport delays, firm domestic crude prices, and strong export netbacks have pushed up domestic diesel prices of Russia's main oil product exports.

Railway delays have slowed the transportation of oil products from refineries to the ports of St. Petersburg and Novorossiisk. This stems from a shortage of railcars and engines because of the invasion of Ukraine, coupled with increased flows of coal and grain, as well as the allocation of more cars for the transport of jet fuel to meet military and travel demand.

In August, Turkey and India consolidated their lead as Russia's top oil product importers despite the overall slide in total product exports, the data showed. Collectively, Turkey, India, and the UAE bought 1.04 million b/d of Russian fuel in August, or 46% of total product exports.