The total daily volume of crude shipped from Russia rebounded to 2.89 million barrels in the seven days to November 25, with the EU’s price cap deadline approaching, Bloomberg reported on Monday.
According to the report, the volume of crude on vessels heading to China, India, and Turkey, plus the quantities on ships that are yet to show a final destination, rose again to a new high of 2.5 million barrels a day in the four weeks to November 25. That is three-and-a-half times higher than the volume shipped in the four weeks immediately prior to the launch of Russia’s military operation in Ukraine in late February.
Tankers hauling Russian crude are becoming “more cagey about their final destinations,” Bloomberg reports. The volume of crude on vessels leaving the Baltic and showing their next destination at Port Said or the Suez Canal reportedly jumped to almost 650,000 barrels a day. “It remains likely that most of these vessels will begin to signal Indian ports once they pass the canal,” the media outlet said.
According to Bloomberg, the total volume of crude expected to end up in Asia hit 2.3 million barrels a day on a four-week rolling average basis, including 115,000 barrels a day on tankers “whose point of discharge is unclear.” The combined figure set a new high for the year so far, the media outlet reports.
Meanwhile, Russia’s seaborne crude exports to European countries declined below 500,000 barrels a day in the 28 days to November 25. Flows were down by 104,000 barrels a day, or 18%, from the period to November 18. The figures do not include shipments to Turkey.
The report comes as EU nations struggle to decide on the price cap level for Russian crude, with the measure coming into effect on December 5.
“Should the politicians fail, which remains an outside possibility, EU companies will no longer be able to provide insurance and other services to ships carrying Russian crude and seaborne imports to the bloc will cease,” Bloomberg wrote. “If they succeed, European countries will still halt purchases from Russia, but companies will be permitted to carry Russian crude in European ships and to provide insurance and services as long as the cargo was purchased at a price below the cap.”
Moscow has already threatened to ban crude supply to countries that participate in the price cap scheme. “That could hit saborne flows to Bulgaria and possibly Slovakia and the Czech Republic, all of which have received exemptions from the EU’s import ban,” the report said.
Russia’s Warning To West
A price cap on Russian oil could cause shortages and disrupt investment in the energy sector, Deputy Prime Minister Aleksandr Novak has warned. Moscow will strictly observe its commitment to market principles in international trade, he added.
“Our position is pretty rigid here, and I have voiced it on many occasions. Regardless of what level is picked for the price cap, even it is high, it will be unacceptable in principle in terms of signing contracts. We will work under market conditions,” Novak told a business forum on Tuesday, according to Russian media.
The deputy prime minister blasted the U.S. and its allies for trying to impose various restrictions on Russia’s energy industry, blocking its access to technologies and stifling Russian international trade. Such actions “come with great risks” and may cause deficits and underinvestment, he said.
“This would be true for any commodity that Western nations may want to impose their rules on in the future,” Novak predicted.
G7 nations agreed to impose a price cap on Russian crude in September, with enforcement set to begin on December 5. The EU is negotiating its own version of similar restrictions, with Poland reportedly standing in the way of an agreement by pushing for a lower cap level. Shipments of Russian crude that do not comply would be denied insurance and other services by companies in Western jurisdictions, according to the plan.
Western officials believe Russia will still sell under the new terms, but would be denied windfall profits amid the global energy-price hike. However, Novak and other top Russian officials have said the country will not accept any cap.
Novak’s remarks came during the Russian-Chinese Energy Business Forum, an event organized by the governments of the two nations every year since 2018. Chinese Vice Premier of the State Council Han Zheng read a statement from President Xi Jinping during the event, in which the Chinese leader described energy as a “cornerstone of practical cooperation” between the two nations.
“China intends to build closer partnership with Russia in the energy sphere, foster development of clean and ‘green’ sources of energy, jointly defend international energy security and stability of supply chains, and contribute to the long-term reliability of the international energy market,” the message read.
Russia became the biggest supplier of oil to China after EU nations chose to cut trade with Moscow as a form of punishment for its role in the Ukraine conflict. Beijing disapproved of Moscow’s decision to send troops into its neighboring country in February, but blamed the US and the expansion of NATO in Europe for triggering the hostilities in the first place.
Russian Oil Price Cap: EU States Yet Fail To Agree
EU governments have been unable to agree on a proposed price cap for seaborne Russian crude oil as of Monday, diplomats told Reuters.
Poland and some Baltic states have reportedly demanded that the $65-70 figure proposed by the G7 countries be lower still, in order to hamper Russia’s ability to finance its military operation in Ukraine.
Warsaw insists the proposed cap will not have the desired effect on Moscow, pointing out that the country’s oil is currently trading somewhere between $52 and $63.50 per barrel. Along with Lithuania and Estonia, Poland has urged the bloc to set a ceiling of $30, allowing Moscow just $10 in per-barrel profits, assuming a production cost of $20 per barrel.
The three countries also want to add a review mechanism so that the cap can be revised further down should the desire arise, and have called for a more coherent outline of the next sanctions package targeting Russia.
Poland’s intransigence is reportedly irritating other bloc members, with one EU diplomat complaining to Reuters that Warsaw was “completely uncompromising on the price without suggesting an acceptable alternative” and adding there was a “growing annoyance with the Polish position.”
While Malta, Cyprus, and Greece had previously argued the G7’s proposed cap was too low, diplomats explained they secured concessions in the legal text and were willing to move forward with the current figures. Hungary withdrew its own opposition last week, after securing an exemption from the measure.
The price cap is supposed to prevent shipping, insurance, and reinsurance companies from doing business with Russian oil producers or resellers who try to sell the commodity at a profitable margin. Most major shipping and insurance companies are based in G7 countries, meaning an agreement among those nations would severely hobble Moscow’s ability to sell its oil at prices higher than the capped rate. Russia has repeatedly said it would not sell oil to any country that goes along with the cap.
Oil Supplies Will Be Withdrawn To Price Cap Countries, Warns Russia
Moscow will embargo countries that support the Group of Seven (G7) nations’ proposed price limit on its oil, Russian Foreign Ministry spokeswoman Maria Zakharova warned on Thursday. The statement was echoed by Kremlin spokesman, Dmitry Peskov.
According to media reports, EU diplomats are optimistic they can reach a deal on a price ceiling for Russian oil exports despite sharp splits over the plan. Ambassadors are scheduled for more talks on Thursday evening to continue their discussions, Bloomberg sources say.
“We have repeatedly said that the introduction of so-called price ceiling for Russian oil is an anti-market measure, it disrupts supply chains, and can significantly complicate the situation on global energy markets,” Zakharova told a briefing on Thursday, adding “Russian Federation does not plan to supply oil to countries that will join the cartel of buyers.”
Zakharova noted that many oil-producing countries also oppose such a measure, pointing out: “They simply understand that today, by targeting Russia for purely economic reasons, the can apply such measures to any other country.”
She stressed that “price dictates undermine the world trade system and create a dangerous precedent not only in the energy market but also for international trade in general.”
In the price cap measure, there is a risk of a severe global energy crisis if Russia cuts off supplies and it is not clear if the price cap will have an impact on Moscow’s revenues.
On Thursday, Kremlin spokesman Dmitry Peskov said Moscow would embargo nations that support the proposed price limit on its oil.
A price cap on Russian oil proposed by the European Commission is too high and may be blocked by Estonia, Minister of Foreign Affairs Urmas Reinsalu said on Thursday, as quoted by Estonian state broadcaster ERR.
“Estonia finds that the price horizon’s ambition is too low, considering that the EU has also failed to agree on a ninth sanction package. The cap seems too high,” Reinsalu said at a government press conference, adding that discussions were ongoing.
Estonia’s warning came after EU leaders had already watered down the proposed cap by weakening some shipping provisions and delaying the implementation of the measure. Under the updated plan seen by Bloomberg, a grace period would apply to crude loaded before December 5, when oil-related sanctions come into effect, and unloaded by January 19.
It is hoped that the price limit would allow Russian production to remain at pre-sanctions levels, but reduce the country’s oil revenue.
India’s Purchase Of Russian Oil
India has bought about 40% of all seaborne Russian Urals grade oil capacity in November, Reuters reported on Monday citing its calculations based on Refinitiv figures and data from traders.
According to the figures, this made New Delhi the largest buyer of Urals oil this month.
India has been boosting imports of Russian oil for several months. In October, Russia overtook Saudi Arabia and Iraq to become the South Asian country’s largest oil supplier with a 22% share in India’s total crude imports, according to data from the energy cargo tracker Vortexa.
Prior to this year, European countries used to be the largest buyers of Russia’s Urals grade oil. Those exports dropped amid Western sanctions on Moscow, with European countries accounting for less than 25% of the shipments this month. Nearly all of them went to refineries in which Russian energy firms have a stake.
Traders expect the volume of Urals exports to the EU to drop further in December when a proposed price cap on Russian oil comes into force.
Overall, 7.5 million tons of Urals grade oil left Russian ports this month, apart from Kazakhstan’s transit volumes. Roughly 15% of those exports went to Turkey, which remained the biggest buyer of Urals oil in the Mediterranean. Several shipments were also on their way to Egypt, data showed, where they are likely to be reloaded onto other tankers for delivery to Asia.