West to East Russian Crude & Fuel Oil
Nov. 8, 2024
West-to-East cargo flow, which has been dominated by Russian exports to the East, simultaneously trending lower in 2024 for both crude and refined products. On the crude side, exports to Northern Europe saw a notable decline since Russia’s invasion in Ukraine, while Far East and India rapidly increased their intake of Russian crude since then. These export levels expanded further after the Price Cap being adopted; however, exports to the Far East (predominantly exports from the Baltic and Black Sea to China), significantly retreated since the Red Sea disruption. Despite Houthi promises not to attack Russian and Chinese ships, the 2009-built Aframax Huang Pu was attacked by Houthis in March while carrying Russian cargoes through the Red Sea. As a result, the month of April-June saw three consecutive month-on-month drops in China’s intake of Russian cargoes from its West ports (blue and green bars in the right chart); as of now, most of China’s imports of Russian crude comes from its Pacific ports (mainly Kozmino). India’s imports, on the other hand, have not seen any impact from the Red Sea disruption. More interestingly, most exports by Aframax tankers to India continue flowing through the Suez Canal instead of rerouting through the Cape, partly explains our overestimate of mid-sized tanker demand. With India’s purchase of Russian crude on the delivered basis, the option to reroute became a ship owners’ decision to manage the risk and savings to transit through the Red Sea chokepoint.
On the refined product side, drone strikes on Russian refineries put a cap on available products for the export market. Coupling with the escalating freight structure amid the Red Sea disruption, the West-to-East CPP flow has markedly slowed. Fuel oil exports to the Middle East (orange bars in the left chart) also took a big hit during the summer, when Russian fuel oils usually blend with local crude for power generation plants. We foresee continued downside risks on the West-to-East cargo flows amid the Red Sea disruption.
Source: McQuilling Services, AIS Tracking
Share
Comments
You need to login to comment.
