Russia ready to export more crude, following February decline

Russia is ready to export more crude as the war in the Middle East hampers global supply and after February showed another decrease in Russian seaborne shipments.

Russian seaborne crude exports in February dropped 4% month on month to 3.4 million b/d, the third month of declines in a row, S&P Global Commodities at Sea data showed.

Deliveries to India fell 43% on the month to 503,000 b/d. Shipments to China fell 7% on the month to 1.1 million b/d, the data showed. But the full picture is not yet clear; volumes showing Singapore, a top transshipment center, as the destination jumped 139% on the month to 413,000 b/d, while volumes still on ships with unknown destinations reached 563,000 b/d, up 129% on the month.

Russia is ready to increase oil exports to India and China, deputy prime minister Alexander Novak said March 4, as the conflict in the Middle East raises global supply concerns.

"We are always ready; our oil is in demand. If they will buy -- we will sell," Novak said, when asked if Russia will increase supplies to India and China, the Tass news agency reported.

Tatiana Mitrova, a fellow at Columbia University's Center on Global Energy Policy, said that Russia could increase maritime exports to India and China, but pipeline supplies to China are close to full capacity.

Indian refiners are maintaining their normal throughput levels but have started negotiating for incremental crude oil cargoes from the US, Russia, and West Africa to ensure that supplies remain plentiful in the event the Middle Eastern conflict drags on for a longer period, industry officials and analysts said March 5.

While physical crude availability in the country might be sustained through alternatives to Middle East barrels, analysts and refining sources said there were concerns that the cost structure would deteriorate sharply due to higher crude procurement prices, elevated freight and insurance costs, as well as longer shipping routes.

"India faces elevated exposure to this disruption, with an estimated 50%-55% of its crude oil and LNG imports transiting the Strait of Hormuz. Strategic petroleum reserves cover only 8-9 days of oil demand, and there are no comparable strategic reserves for natural gas. If the disruption persists beyond the very short term, supply-side stress will intensify rapidly," said Sumit Pokharna, vice president at Kotak Securities.

Platts, part of S&P Global Energy, assessed Urals crude on a FOB basis at Primorsk at $46.30/b March 4, a $34.86/b discount to Dated Brent. The discount has shown little change since the Middle East war started; it was $34.23/b Feb. 27.

Russian domestic prices stable

Russia's refined product exports were also down in February; they declined 4% on the month to 2.3 million b/d, reversing two months of increases, despite refineries starting to emerge from maintenance.

Transshipment hub Egypt was the top destination, with Russian deliveries jumping 94% on the month to 433,033 b/d, but it is not immediately clear where the end-users will be. Turkey received 362,792 b/d, a 13% drop on the month. Deliveries to China jumped 53% on the month to 301,321 b/d.

Russia's Federal Antimonopoly Service (FAS) said March 4 that it is monitoring the oil products market and that at the moment prices are at the level of the autumn of 2024. FAS also said that the stocks at refineries and tankfarms are able to fully cover domestic demand.

Separately, Kremlin's spokesman Dmitry Peskov said March 5, according to local media, that the war in the Middle East should not lead to fuel price volatility inside Russia. Peskov also said that the government and FAS are constantly monitoring fuel prices.