Russia was able to quickly restore and even increase the volume of oil exports against the backdrop of a record drop in prices and falling incomes. Exports from Russia increased by 30%, or 876,000, to 3.8 million barrels per day last week (ending January 13), according to Bloomberg estimates . The main growth is associated with an increase in shipments from the Baltic ports: deliveries from there increased by 626,000 barrels per day.
The agency notes that the increase in exports indicates that the initial difficulties caused by Western sanctions have been overcome. However, there is little positive for the Russian authorities: deliveries in weekly terms increased by 30%, but revenues from them – only by 4%, or $ 3 million, and for the week amounted to only $ 61 million, the agency calculated. Thus, Russia is now forced to deliver record volumes of oil in order to maintain an acceptable level of income. Such a supply policy – at least for now – runs counter to the threats and speeches of the authorities, who argued that Western sanctions would lead to an imbalance in the market.
The agency also notes that part of the growth in revenues can be offset by a drop in oil supplies through pipelines: since 2023, Poland and Germany have refused pipeline Russian oil. True, Hungary, Slovakia and the Czech Republic, which retained the right to receive pipeline oil, on the contrary, increased supplies in 2022. Also, the drop in revenues is associated with a large-scale tax maneuver that is taking place in the Russian oil industry: the export duty should be zeroed by the beginning of 2024, and the tax burden should be transferred to the mineral extraction tax (MET) – thus, taxation from exports will actually be transferred to production .
The loss of the European market has led to a situation where the supply of Russian oil to the buyer must be provided for a much longer delivery. The agency recalls that Russian oil reached Rotterdam or Polish ports in just a week, but India, now a key buyer of Russian oil, took 31 days. Long delivery forces to attract more ships, which is reflected in the price of oil and complicates the logistics of deliveries. Russia is trying to use its "shadow fleet", but even these ships are not enough to keep exports at a high level. European companies can cooperate with Russian companies if the cost of oil in a tanker is below $60 per barrel, but the demand for cooperation is declining, the agency said.
The number of cases of transshipment of Russian oil from tanker to tanker on the high seas is growing significantly. In some cases, this simplifies delivery, when oil from northern ports is pumped from arctic-class tankers to simple ones (thus partially compensating for the lack of arctic vessels). The proportion of ships that do not reflect their final destination has also grown significantly, accounting for just over a quarter of daily shipments, or 1.05 million barrels.
There have been no fundamental changes among the buyers of Russian oil: it is traditionally China and India, as well as Bulgaria and Turkey. It is noteworthy that Turkey has significantly reduced the supply of Russian oil: if in September Turkey received about 400,000 barrels per day from Russia, now it is only 47,000. Cumulative shipments to India, China and "unknown buyers" have reached a new record and now amounted to 2.84 million barrels per day (74% of total exports), which puts Russia in direct dependence on fuel demand in this region.
The agency notes that Russia's oil revenues are likely to continue to decline in the near future, as the export duty for February is only $1.75 per barrel, which is 23% lower than in January, a record low since the coronavirus crisis. In addition to the tax maneuver, the reason for the reduction in revenues is a huge discount on Russian oil. Over the past month, the average price of Russian oil has fallen to $46.82 a barrel, nearly $35 less than benchmark Brent, according to the agency.
For the Russian budget, oil prices below $70 pose a real threat of a sharp increase in the deficit. In such a situation, the government will have to increase the public debt, as well as depreciate the ruble in order to bring the budget to an acceptable state.
