18 Jan 2024 13:52

IEA: Russia increases oil exports 500,000 bpd in Dec, but revenues fall 9% due in part to investigations by U.S. Treasury

MOSCOW. Jan 18 (Interfax) - Russian oil production decreased 20,000 bpd in December to 9.48 million bpd, while preliminary estimates show oil and petroleum product exports totaled 7.8 million bpd in December versus 7.3 million bpd in November, the International Energy Agency said in its monthly report.

The IEA said that Moscow promised to reduce oil exports 300,000 bpd from September through the end of 2023 as compared to the average level for May-June 2023. At that time, the IEA calculated that Russia was exporting 7.4 million bpd of oil and petroleum products.

Production of liquid hydrocarbons in Russia (oil, condensate and natural gas liquids) reached 10.9 million bpd in December. For 2023 as a whole, production was 10.96 million bpd, which is 130,000 bpd less than the year before, IEA calculations show.

IEA analysts said that the continued decline in export prices for Russian oil kept Urals below the price ceiling set by the G7 ($59.63 per barrel FOB Primorsk and $59.65 per barrel FOB Novorossiysk) in December, citing information from Argus. Increasing discounts on Brent oil accounted for one-third of the roughly $10 per barrel drop in the price of Urals oil by November, the rest being the result of a sharp drop in global oil prices, the IEA said.

With an increase in exports of 500,000 bpd, the highest level since March 2023, export income decreased $1.4 billion to $14.4 billion, the lowest level since June 2023, the agency said.

The IEA said that Urals discounts to Brent have increased due to the U.S. Treasury Department's investigation into tankers, their owners and the traders who transported Russian oil at prices above the established price ceiling (a violation of sanctions).

The report said, according to Argus, that the withdrawal of tankers carrying Russian oil caused freight costs to increase nearly $2 per barrel after the start of the investigation, and by mid-December, this had caused traders' margins to drop to almost zero. However, in January they appear to have recovered to nearly $2.75 per barrel, a level not seen since August-September.

This has undermined the competitiveness of Russian Urals crude, forcing Indian refiners to look for alternatives. Pressure from the US Treasury's investigation could also affect India's imports of other Russian grades of oil, whose prices stubbornly remain above the $60 per barrel threshold. Reports say that six cargoes of Sokol grade oil have been stopped or diverted on their way to India. Sokol crude supplies to India have been declining since November, with some being diverted to China, the IEA said.

Russia's other key oil export grade, ESPO, has benefited from greater stability in the discount to Brent, especially relative to regional benchmark Dubai. The discount has recently fallen from more than $11 per barrel in February 2023 to about $5.2 per barrel since October. The IEA said that Chinese buyers dominate the market for this oil, and are unfazed by the U.S. Treasury's efforts, since associated shipping costs have not been affected.