Summary

• In October 2023 Russian seaborne oil exports volumes decreased by ~3% driven by 13% oil products exports decline (MoM). The total oil exports revenues changed little over September as $690 mln drop in oil products exports were mostly compensated by $660 mln increase in crude export revenues.

• In October 2023 Russia managed to continue lowering its reliance on Western maritime services mainly for crude shipments – only 26% of crude oil were shipped by tankers with P&I insurance compared to 32% in September. On contrary, coverage of oil products shipments with P&I Club insurance barely changed since September and stayed at 60%.

• The KSE Institute estimates 185 loaded Russian shadow fleet tankers left Russian ports in October 2023, 72% of which were built more than 15 years ago. Russian shadow fleet poses huge environmental risks for the EU as decrepit tankers without P&I insurance navigate several European countries coastlines including Danish Straits. In October 2023, the shadow fleet was responsible for exports of around 2.6 mb/d of crude oil and 0.8 mb/d of oil products.

• Russia hides its connections to shadow fleet operations by dispersing ship managers and hiding its ownership of shadow fleet tankers. As KSE Institute found in October, Sun Ship Management and Scf Mgmt Fzco, top two leaders in seaborne oil exports by shadow fleet, operate the fleet of tankers that has the same features as owner possesses only one tanker, but all these owners have the same registration address.

• Narrowing but still significant price discounts for both Russian crude and oil products continue to support the strong demand for Russian oil exports. Average Urals FOB Baltic, Black Sea and ESPO FOB decreased by over $2/bbl to $77/bbl, $79/bbl and $84/bbl respectively. Diesel, fuel oil and naphtha prices were traded above the price caps in October. However, the discount on Urals has widened by $3/bbl by the end of October after the US OFAC imposed its first blocking sanctions on two vessels and owners for using US-based services while carrying Russian crude sold above the price cap. The US Treasury letters to shipping companies for potentially breaching G7/EU price cap sent in early November also indicates a switch to tough-touch approach of price cap enforcement.

• Russian oil export revenues barely changed since previous month and stayed at $18.3 bn, the second highest level since July 2022. KSE Institute now projects Russian oil revenues of $178 billion in 2023, while in July they had been expected to reach only $153 billion. According to the KSE Institute modelling, in the base case with current oil price caps and status quo of sanctions but their stronger enforcement, revenues will contract to $155 bn and $152 bn in 2024 and 2025 respectively compared to $218 bn and projected $178 bn in 2023 respectively. If the price cap is lowered to US$ 50/bbl discount to forecast Brent prices, revenues will fall to $77 bn and $70 bn in 2024 and 2025 respectively. However, in case of weak sanctions enforcement, Russian oil revenues could increase to the robust $200 bn and $197 bn in 2024 and 2025 respectively.