Russian oil product exports slump to post-pandemic low in August

Russian oil product exports slumped to a post-pandemic low in August, according to tanker tracking data, as refineries prioritize the domestic market amid the peak summer demand season and Moscow's fuel flows to China almost halved amid weak demand signals.

Seaborne Russian export loadings of diesel, fuel oil, naphtha and other refined products average 2.09 million b/d, according to S&P Global Commodities at Sea, down 13% or 300,000 b/d on the July total and almost 700,000 b/d below January levels when Ukraine began a barrage of long-range drone strikes targeting Russia's refining capacity and fuel storage.

The last time Russian product exports fell below 2 million b/d was during the peak of COVID-19 lockdowns in mid-2020.

The fall in fuel exports comes despite Russian refineries having largely recovered from a barrage of Ukrainian-led drone strikes during the first half of the year. While the 310,000 b/d Yaroslavl facility dodged damage from an attack on Aug. 26, Russia's Moscow refinery halted operations fully or partially following a drone attack Sept. 1. It was the first confirmed attack on the plant which supplies the majority of Moscow's fuel.

Russian refineries increased their processing in August ahead of the start of September maintenance, according to market sources and media reports. The increase was largely attributed to the return from maintenance of Gazprom's gas condensate processing plants in Astrakhan and Surgut. However, unplanned outages at the Omsk refinery last month dented higher throughput rates.

Gasoline exports saw the biggest fall on the month by percentage, diving 40% to 75,000 b/d. Gasoline exports are set to fall further next month after Russia banned gasoline exports from Sept. 1 until the end of December to control domestic prices amid strong seasonal demand and planned refinery turnarounds.

In terms of volumes, Russia's biggest fuel export, diesel fell by 16% to 670,000 b/d, the lowest since October 2023. Russian naphtha exports shrank by 100,000 b/d to 337,000 b/d, the tanker data shows.

Regionally, fuel exports to China fell the most, shrinking by 55% to 153,000 b/d, the data shows. The lowest since April, the fall comes amid rising concern over weak Asian demand weighing on key oil product cracks amid tepid economic activity. Chinese refineries' crude throughputs extended a downtrend in July, falling 2.0% from June to a 21-month low of 13.96 million b/d, reflecting cooling demand in Asia's biggest oil consumer after the country's gross domestic product growth slowed to 4.7% in the second quarter.

In addition, traders and mostly export-oriented refiners across Asia have indicated that they are wary of a possible oversupply of Chinese oil products in the second half of 2024 weighing on what's already fragile Asian oil product cracks and refining margins.

Crude exports

Meanwhile, Russian seaborne crude exports edged up from a 12-month low in July despite thin discounts for Moscow's oil and improved compliance with OPEC+ output cuts.

Crude shipments from Russian ports averaged 3.36 million b/d in August, up 130,000 b/d or 4% from July when falling cargoes of Urals crude from the Baltic port of Ust-Luga and Novorossiisk in the Black Sea led the declines.

The biggest rise in crude exports during August was to Russia's top oil buyer India, with flows to Indian ports recovering by 200,000 b/d on the month to 1.67 million b/d. Crude flows to India, however, remain down on near-record levels of almost 2 million b/d in June. The drop in July came as a number of Indian refineries were scheduled to shut down for seasonal maintenance in Q3 2024.

The slide in seaborne Russian crude exports also comes as Moscow looks to make good on pledges to improve its compliance with OPEC+ output targets.

Russia has promised to compensate for overproducing through the first half of 2024, when it pledged to implement deeper OPEC+ cuts. The pledge to OPEC+ includes a transition to crude production rather than crude supply cuts during the third quarter. Russia on average produced 480,000 b/d above its output target during the first six months of 2024, according to assessments by secondary sources, which include the Platts OPEC+ Survey from S&P Global Commodity Insights.

The higher crude exports come amid a modest widening of the discount for Russia's crude as Western authorities look to clamp down on a growing fleet of "shadow" tankers able to sidestep the G7-led price cap on Moscow's oil.

Platts, part of S&P Global Commodity Insights, assessed Urals on a FOB Primorsk basis at a $12.3/b discount to Dated Brent on Sept. 3, up from a post-Ukraine invasion low of $11.9/b on Aug. 7.