Russia’s financial reserves are facing significant pressure due to a dual challenge: a decline in oil shipments and a continuous drop in crude prices. This has resulted in the value of Russia’s crude exports reaching its lowest point since January 2023. The situation has been exacerbated by a dramatic decrease in four-week average crude flows as of December 14, marking the steepest week-on-week decline since Russia’s invasion of Ukraine in 2022.
Compounding the issue is the difficulty in offloading cargoes, with crude at sea increasing by 40 percent since the end of August. Notably, at least 20 cargoes loaded at Russia’s western ports in September and October remain undelivered. This logistical challenge is further complicated by numerous tankers disappearing from tracking systems in the Riau archipelago, a strategic location for transferring sanctioned Iranian barrels, which is increasingly used by carriers of Russian crude.
Geopolitical Tensions and Economic Impact
The decline in Moscow’s oil revenues coincides with heightened diplomatic efforts by the United States to encourage Ukraine and its European allies to negotiate a peace deal. This comes even as the Kremlin persists in its attacks on Ukraine’s gas and power infrastructure. In response, Kyiv has expanded its offensive to target Russia’s oil assets, including production platforms in the Caspian Sea and tankers transporting Russian oil.
According to Bloomberg’s vessel-tracking data, Moscow shipped 3.61 million barrels per day in the four weeks leading up to December 14. This figure represents a decrease of approximately 70,000 barrels from the previous period ending December 7, driven by a 1.24 million barrel per day drop in weekly shipments.
Price Declines and Market Reactions
The situation is further aggravated by an 11th consecutive drop in crude prices. The price of Urals crude has fallen by about $20 per barrel, or more than one-third, since its peak in mid-July, reaching its lowest level since the onset of the war. Although Pacific-loading ESPO crude has performed slightly better, losing about 22 percent of its value over the same period, sanctions continue to suppress demand. This has allowed at least one Chinese buyer to purchase a cargo at what traders describe as the steepest discount this year.
In the week to December 14, a total of 27 tankers loaded 20.98 million barrels of Russian crude, a sharp decline from 29.65 million barrels on 38 ships the previous week.
On a daily average basis, shipments plummeted to 3 million barrels per day, down by about 1.24 million barrels per day from the previous week, marking the largest week-on-week drop since the full-scale invasion of Ukraine in February 2022. The slump was primarily driven by a significant reduction in shipments from the Baltic port of Primorsk.
Export Value and Future Outlook
The gross value of Moscow’s exports on a four-week average fell to $1.09 billion per week in the 28 days to December 14, with the impact of reduced export quantities exacerbated by the ongoing decline in average prices. The weekly export value averaged about $883 million in the seven days to December 14, down 30 percent from the previous period, marking the lowest level in three years.
Shipments to Russia’s Asian customers, including those with no final destination, decreased to 3.36 million barrels per day in the 28 days to December 14, down from a revised 3.41 million in the previous period. While the volume of Russian crude heading to China and India appears to be declining sharply, this is largely offset by increasing quantities on vessels yet to declare a final destination. Tankers are increasingly not showing a final destination until they are well across the Arabian Sea, with some never indicating a final port, even after arriving to discharge.
Flows on tankers signaling Chinese ports stood at 840,000 barrels per day in the four weeks to December 14, down from 920,000 for the period to December 7.
The amount destined for India fell to 800,000 barrels per day from a revised 980,000 barrels per day in the period to December 7. However, there is the equivalent of 1.72 million barrels per day on vessels yet to show a final destination. Of this, about 1.62 million barrels per day is on ships from Russia’s western ports indicating destinations such as Port Said or the Suez Canal, or from Pacific ports with no clear delivery point. A further 100,000 barrels per day is on tankers yet to signal a destination.
Historically, these cargoes have predominantly ended up in India or China, but stricter US sanctions may keep this oil at sea unless Russian sellers can devise new strategies. Flows to Turkey in the four weeks to December 14 edged down to about 230,000 barrels per day from a revised 260,000 barrels per day in the previous period. Shipments to Syria remained at zero, with tankers typically disappearing from tracking systems when south of Crete, complicating flow estimates before arrival at Baniyas port.
As Russia navigates these economic and geopolitical challenges, the future of its oil exports remains uncertain. The international community will closely watch how Moscow adapts to these pressures and whether new alliances or strategies emerge to mitigate the impact of declining revenues and increased sanctions.
