Russian oil exports recorded the highest level since April, with an increase of around 270,000 barrels per day (bpd) to 8.1 million bpd in November before the EU crude oil ban began, the International Energy Agency (IEA) said in its monthly oil market report.
This quantity was down from the 8.2 million bpd of oil that the country exported in February, when the Russia-Ukraine war erupted.
Despite increasing export volumes, Russia’s export revenues fell by $700 million to $15.8 billion due to lower prices and wider discounts for Russian-origin products.
Crude exports to the EU fell by 430,000 bpd to 1.1 million bpd, while seaborne volumes fell by 330,000 bpd to 500,000 bpd, falling below the Druzhba pipeline delivery capacity of 590,000 bpd for the first time.
Only around 350,000 bpd of Druzhba and 100,000 bpd of seaborne volumes are allowed to continue flowing into EU countries as of Dec. 5, when the EU ban on Russian seaborne exports was imposed along with a $60 per barrel price cap.
The IEA highlighted that crude oil deliveries to Türkiye fell by 150,000 bpd in November due to a pause in purchases of Russian feedstock for Azerbaijan’s Socar Aliaga refinery in Türkiye.
However, the agency noted the rise in Russian exports to India, which hit a new record with a surge to 1.3 million bpd last month, although seaborne and pipeline exports to one of Russia’s top customers, China, remained unchanged over the same period.
"Some Indian refiners have reportedly started accepting Russian insurance and buying crude on a delivered basis," the agency explained.
Changing market for Russian exports
The EU sanctions on Russia’s financial sector and oil exports have resulted in changes to its routes and trading partners, pivoting from "unfriendly" Western countries to Asia.
The IEA said the share of Russian oil exports to the EU fell to 28%, while India’s share expanded to 18%, according to the report analyzing market data from November.
The agency said the introduction of the $60 a barrel price cap on Russian crude oil created "an unexpected logistical challenge for not only Russian but also Kazakh crude exports as Turkish authorities started demanding proof of insurance to allow vessels carrying crude oil to pass through Turkish Straits."
"At some point in early December, 30 vessels, mostly carrying Kazakh crude oil, were waiting for a southbound passage through the Bosporus and Dardanelles, or loaded at Black Sea ports," it added.
Meanwhile, the agency said that Russia is getting ready to switch trade in products to a long-haul basis.
Russian discounts well below price cap
According to the IEA, Russian prices saw steeper declines as Urals in Northwest Europe fell by nearly $30 a barrel to $43 a barrel by early December, well below the $60 a barrel price cap finally agreed by the G-7, Australia, and the EU.
It explained that the price cap aims to facilitate trade with Moscow by allowing third-party buyers to use EU maritime services as long as they conclude purchases below that limit.
However, Russia said it would rather cut output than sell oil to countries that impose the cap.
"We believe Russia may be forced to shut in nearly 400,000 bpd of total oil in December, with more losses anticipated in the first quarter of next year after the EU bans Russian product imports," the agency said.
The IEA forecasts that around half of the Druzhba pipeline’s remaining flows would stop, which could force Russia to cut crude output by the same capacity.
"By the end of the first quarter of 2023, we forecast that around 1.8 million bpd will be shut in versus pre-invasion levels, which would reduce average production of oil, including condensates and NGLs (natural gas liquids), to 9.6 million bpd on average in 2023," it added, AA reports.
