Russia’s monthly oil exports reach highest level in a year

20 June 2012

Copyright: GraphicObsession

Net oil exports from Russia surged to 9.68 million barrels per day (mb/d) in April, their highest level in a year, according to the International Energy Agency’s latest Oil Market Report (OMR).

This increase – 600 thousand barrels per day (kb/d) more than the previous month – was prompted by refineries undergoing maintenance thus freeing up more crude to be sent abroad which otherwise would have been processed.

The tanker industry, which has suffered recently as oil tanker supply has outgrown demand, meaning lower rates for tanker owners, benefited significantly from a 650 kb/d hike in seaborne crude exports coming from Russia.

The new Ust Luga terminal, which was launched at the end of March, is flagged by the OMR as a key reason for this increase in exports, having averaged 240 kb/d of exports in April. Looking ahead to May, Ust Luga is scheduled to ship 400 kb/d of oil.

While it was being built some analysts saw the Ust Luga terminal – located around 110 kilometres west of St Petersburg – as a potential geopolitical tool in the region as it would allow Russia to take control of its oil exports by reducing its reliance on transit states and ports such as Gdansk in Poland. It could also have meant that Russia would not be as reliant on its customers receiving oil via the Druzhba crude pipeline.

IEA analysis, however, suggests that the terminal is in fact being used as an economic tool, benefiting Russian crude producers in the short-term. Following sanctions against Iran which target its oil revenue, demand for Russian Urals oil – a similar blend to Iranian crude and therefore a good substitute – has outstripped supply of Urals crude being sent via Black Sea ports. The arrival of the Ust Luga terminal has given Russia a new means of meeting this increased demand for the Russian Urals blend.

“The extra flexibility in the Transneft system [Russia’s national pipeline operator] which Ust Luga affords appears to have been utilised to fulfil incremental demand and allow producers to orient their exports towards the most profitable outlets,” the OMR states. “Given the continuing Iranian sanctions, this trend could continue for the foreseeable future.”

The Oil Market Report (OMR) is a monthly IEA publication which provides a view of the state of the international oil market and projections for oil supply and demand 12-18 months ahead. To subscribe, click here.