India picks up on the opportunity to buy Russia’s cheap export crude as Europe refineries refuse to purchase it

According to data compiled by real-time energy cargo tracker, Vortexa, European refineries are avoiding Russia’s flagship export crude, Urals. At the same time, India has been picking up more of Russia’s Black Sea and Baltic cargoes, motivated by large discounts.

Vortexa’s Analysis of Russia’s Exports

Sources state that Russia exports its Urals from the Baltic ports of Primorsk and Ust Luga but to a lesser extent from the Black Sea port of Novorossisyk. Vortexa’s recent analysis reads:

Because of the larger proportion of the Urals exported from the Baltic versus the Black Sea, the most dramatic changes in on-the-water volumes are seen in the former.

Rising Volume of Urals

The Urals, of Baltics origin, have increased sharply since the start of Russia’s war in Ukraine and reached 36 million barrels as of the 10th of April 2022, the highest on-the-water volumes since the second quarter of 2020 when global supplies peaked. Black Sea origin Urals has also grown while on-the-water volumes have grown more modestly to around 7 million barrels.

Rising on-the-water volumes for Baltic Urals are a function of relatively stable Urals exports and very limited buying from the usual target market. This has increased the time these cargoes spend on the water, either because they are sailing to further afield, including in Asia, or at least traveling in that direction, awaiting orders as a deal is concluded.

Oil is the largest source of Export Revenue for Russia

According to Primary Vision Network data, the EU imports around 11 million barrels of crude oil and oil products daily. Russia accounted for 29% of EU imports in 2021. Last year, the EU’s crude imports from Russia amounted to about 2.2 million barrels per day, and oil products totaled 1.2 million barrels.

Oil exports account for the largest source of export revenue and one-third of the Russian federal budget. A live tracker published by Europe Beyond Coal with the Centre for Research on Energy and Clean Air (CREA) shows the EU’s oil imports from Russia have hit over €12.5 billion since the start of the war.

According to the International Energy Agency, Russia exported 47% of its total crude exports to the EU, supplying 2.2 million barrels a day out of a total of 4.7 million barrels. Oil products exports to the EU of 1.2 million barrels daily account for 43% of Russia’s total oil products exports.

India to sustain appetite for cheaper Urals

Northwest European and Baltic refiners reduced Ural imports when the war started, as per Vortexa’s data. In March, total Urals arrivals in northwest European and Baltic ports dropped by around 460,000 barrels per day month-over-month to around 620,000 barrels a day.

The declining trend continued this month in the first ten days, down to 370,000 barrels a day, but Vortexa’s analysis said the decline would be even more dramatic were it not for rising imports from the Netherlands.

After the war, India picked up its first Urals cargoes in March both from the Black Sea and Baltic ports, sharply increasing imports to around 500,000 barrels a day. Referring to this, Vortexa’s analysis reads:

India’s appetite for the Urals has picked up in recent weeks, motivated by the deep discounts offered for prompt loading cargoes. Given that it only takes around 13 days for a Suezmax tanker to travel from Novorossiysk to the west coast of India, Black Sea Urals also represent a relatively prompt supply for Indian refiners, faster than the delivery of crude from West Africa.

Vortexa further explained:

The country is expected to continue importing the Black Sea and Baltic Urals, supported by the lack of competition from other buyers for these cargoes. Still, the main constraint in the short term is how much Russian Urals the Indian refining system can cope with.

Robin Brooks, a chief economist at the Institute of International Finance, took to Twitter to share his opinion on the matter and said:

Russian oil export revenues are running at a record pace. If we extrapolate tanker traffic for the first half of April to the rest of the month, April 2022 is way above the same month in previous years. My data shows Russia’s April 2022 exports could hit 160 million barrels, relative to around 130 million barrels in April last year and 100 million barrels in April 2015.

While experts make these predictions in the field, the reality of the exports will reveal itself over time. Only time will showcase Russia’s export revenue through the Urals and its impact on the engaged economies.

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