Russian oil exports rise to four-month high as OPEC+ cut pledge eases

Russia's seaborne oil exports rose to a four-month high in September as the country's crude flows rebounded from 11-month lows amid an easing of crude export curbs and despite a ban on fuel exports to keep domestic pump prices in check.

Russian-origin seaborne crude shipments averaged 3.37 million b/d in September, a 10% rise on the month, to the highest since June and above the average pre-war levels of 3.1 million b/d, according to tanker tracking data from S&P Global Commodities at Sea (CAS). The rise follows Russia's commitment to ease its crude export curbs by 200,000 b/d over August levels as part of a joint move with OPEC+ kingpin Saudi Arabia to cut 1.3 million b/d of crude supplies to support global oil prices.

Russia has said its crude exports would be 300,000 b/d below the May-June average in September, down from 500,000 b/d below those levels in August. Although the tanker data excludes Russian pipeline exports mostly via the ESPO line to China, it shows that Moscow's seaborne crude exports last month were some 330,000 b/d below the May/June average of 3.7 million b/d.

"We estimate lower refinery runs in September will keep supply-to-market roughly flat with July/August, with crude and condensate production below 10.5 million b/d (9.5 million b/d crude). Expect Russian output to remain similarly constrained, at least through the November 26 OPEC+ meeting," oil analysts at S&P Global Commodities Insights said in a note.

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 a surge in crude export volumes earlier in the year.

Crude shipments to India, currently Russia's biggest oil buyer, fell sharply to a 10-month low in September, the data showed, but exports to its key buyers in China, Turkey, and South Korea rose on the month. Russian crude flows to Bulgaria -- which last week agreed to phase out Russian crude imports by Oct 2024 -- also rose to a post-war high of 190,000 b/d last month, the data shows.

Meanwhile, Russia's oil product exports were little changed on the month at 2.36 million b/d, the data showed, up from 2.33 million b/d in August but down from a post-war high of 3 million b/d in March.

Combined, 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 CAS data.

Fuel export ban

The data includes export flows over the nine days after Russia's Sept. 21 temporary ban on fuel exports in a bid to plug a hole in domestic supplies and curb spiraling pump prices.

Russian diesel exports, which had already been falling in recent weeks due in part to higher domestic refinery turnarounds and the diesel-intensive harvest season, averaged a post-war low of 654,000 b/d in September, down 286,000 b/d month on month and from a recent peak of almost 1.2 million b/d in March, according to CAS data.

But the tracking data shows that the 30% slump in diesel exports was more than offset by a jump in flows of gasoline and VGO. Gasoline and VGO exports rose by 59% and 29% respectively to hit 115,000 b/d, the data shows.

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If fully implemented, Russia's fuel export ban is expected to remove almost 1 million b/d of seaborne diesel from world markets and smaller gasoline flows of around 150,000 b/d.

Although market watchers expect the fuel export curbs to be short-lived, Russia's move to temporarily ban nearly all its exports of diesel and gasoline to ease surging domestic fuel prices is set to hit flows to Turkey and Brazil.

Although Europe, Russia's traditional market for most of its diesel exports, stopped buying Moscow's fuels in February, rising Russian product flows to Saudi Arabia and Turkey have allowed those countries to redirect increasing flows of domestic diesel toward Europe. As a result, Turkey, the country has become the third-largest diesel and gasoil supplier to Europe behind Saudi Arabia and the US, CAS data shows.

Russian refineries began fall maintenance as outages in the former Soviet Union region climbed to 1.44 million b/d during the week ending Sept. 15. S&P Global Commodity Insights expected the figure to remain at current levels during the week to Sept. 22.

Price discounts

Russia's higher oil flows in September also come in the face of sliding discounts for its sanctions-hit crude and oil products.

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 $4.7/b discount Sept. 18, the tightest spread since Platts, part of S&P Global Commodity Insights, began assessing the differential at $19/b on Jan. 18. Urals bought on an FOB basis at the Baltic port of Primorsk was assessed by Platts at $82.07/b Sept. 29, taking its discount to Dated Brent at less than half it was at the start of the year to around $14/b.

Russian diesel exports were also being sold above the G7's price cap in since 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.