Russia's Passive Boom in Crude Exports: Refinery Attacks, Forced Sea Exports, and Rising Volume with Falling Prices

Bloomberg reports that Russia has raised its seaborne crude supply to a recent peak. In the four weeks ending June 28, average crude exports in June reached approximately 4.13 million barrels per day. The inventory of crude oil stored on floating tanks at sea has surged to 133 million barrels—the highest level since early this year.

The report notes that most of Russia’s crude exports are headed toward Asia, with China and India accounting for a significant share. Meanwhile, some crude shipments remain unmarked for their final destinations. Amid shifts in logistics routes and reallocation of trade flows, queues of tankers waiting to offload cargo have emerged in certain maritime regions.

Despite setting a new export record, Russia’s total crude export value (revenue) has actually declined due to fluctuations in international oil prices. Currently, Urals crude trading prices in the Baltic and Black Seas are below levels seen at the beginning of this year. This situation is primarily driven by the global reconfiguration of crude oil flows and changes in world demand structure.

Russia’s crude oil exports soared to 4.13 million barrels per day in June, with the most direct cause being Ukraine’s ongoing drone attacks on Russian domestic refineries. Due to massive damage to domestic refining capacity, crude oil that was originally intended to be processed into gasoline and diesel within Russia must now be exported directly as unrefined crude. This forced “crude-for-products” strategy, while boosting export statistics, reveals deep structural weaknesses in Russia’s energy supply chain.

Bloomberg data shows that crude oil inventories on floating storage at sea have skyrocketed to 133 million barrels, with tanker congestion observed near Egypt and Singapore. This indicates that although Russia manages to ship crude out of its ports, it is struggling to find sufficient buyers in the global market. Due to Western sanctions, price caps, and reduced purchasing pace by some buyers like India under U.S. diplomatic pressure, Russia’s vast crude output is searching for outlets at sea—imposing enormous financial and time costs on its logistics and storage systems.

Although export volumes have hit record highs, Russia’s actual energy revenue is shrinking. On one hand, international oil prices have dropped sharply due to easing tensions in the Middle East (such as a temporary peace agreement between the U.S. and Iran, and Iranian crude returning to the market); on the other hand, to maintain its market share in the fiercely competitive Asian market, Russia continues widening discounts on Urals crude, effectively selling at a loss just to stay competitive.

Russia’s record-breaking seaborne crude exports represent a “passive boom” triggered by war. The misalignment of refining capacity caused by refinery attacks, severe congestion in floating storage, and declining export revenues collectively paint a stark picture of Russia’s energy economy under the dual pressures of sanctions and warfare.

Original source: toutiao.com/article/1869473106138187/

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