Oil product exports from Russia to China and Kazakhstan increased in March 2022, with close to 800,000 metric tonnes of oil products exported from the country, according to a report by Russia’s Interfax news agency.
Of all oil products, fuel oil represented the bulk of the exports to China, with 394,299 metric tonnes (mt) exported, 43.6 per cent higher on the month. Diesel exports recorded similar growth of 39.5 per cent to 343,100 mt. Bitumen and residue amounted to 18,700 mt, representing a 34.9 per cent increase on February 2022. Overall, 756, 900 mt of oil products were exported to China last month.
Bitumen and residue represented the bulk of exports to Kazakhstan at 15,700 mt, which was double the volumes delivered in February 2022. Diesel exports were 19.5 per cent higher as at March 2022, reaching 11,900 mt. Gasoline exports rose 32 fold to 7,600 mt, and for the first time in months, Russia exported jet fuel to Kazakhstan.
While exports of fuel to China rose, shipments to other destinations declined as international buyers increasingly shun Russian-origin products following Moscow’s Invasion of Ukraine.
As a result of the diminishing export outlets, fuel oil prices inside Russia have tumbled and refineries that have lower complexity are reducing throughput in order to cut the excess supply, according to market sources. Russian refineries produce around 3 million mt of fuel oil per month, with around 80 per cent-90 per cent heading to exports.
Refinery Closures imminent
Russia’s oil major Lukoil is expecting potential refinery closures due to lack of outlets for fuel oil and spare shortage, Russia’s Kommersant daily reported today, April 7, 2022. The company is expected to ship the excess output to the country’s power generation and temporarily lift the large fines for environmental damage. Russian utilities have increasingly switched to natural gas and typically use fuel oil as reserve fuel during the winter heating season.
Meanwhile, Russian gasoline supply was also rising, as more naphtha was heading into the gasoline pool due to reduced exports. Market participants were concerned that domestic demand was weak on poor prospects for domestic tourism to southern regions, due to the war in nearby Ukraine.
The higher exports to Kazakhstan come as the country has repeatedly extended bans on oil products exports by trucks after experiencing shortages of diesel and jet fuel last year, attributed to overlapping refinery turnarounds. Meanwhile, the Energy Ministry in early April once again proposed extending the current ban for another six months in order to prevent shortages of oil products.
Kazakhstan oil production excluding condensate fell to 1.55 million barrels per day (bpd) in March, down 3% from February, amid export problems from the Black Sea Caspian Pipeline Consortium (CPC) terminal, according to Reuters calculations.
“Due to unscheduled repair works at the Caspian Pipeline Consortium’s (CPC) marine terminal, Tengizchevroil (TCO) is adjusting its production accordingly and is currently exporting its crude oil in line with what has been allocated by CPC,” a Chevron representative said.
The fall in Kazakhstan oil output was because of lower intake in the Caspian Pipeline Consortium (CPC) system in the second half of March 2022, owing to damage of loading facilities at its Black Sea terminal situated in the south of Russia.
The CPC terminal damage affected operations of Kazakhstan’s giant Tengiz and Kashagan oilfields led by Western oil majors including Chevron, Exxon Mobil, Total, Eni and Shell.
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