In July, Russia experienced a notable increase in seaborne exports of fuel oil and vacuum gasoil (VGO), with China and Saudi Arabia emerging as the primary destinations. This surge in exports highlights a significant shift in market dynamics following the European Union’s embargo on Russian oil products.

Export Growth and Destinations

Russian exports of fuel oil and VGO rose by 7% in July compared to June, reaching approximately 4.05 million metric tons. This growth is attributed to the completion of seasonal maintenance at Russian refineries. Despite a substantial decrease in Russia’s primary oil refining capacity—down by about 44% from June’s level to 2.5 million tons—exports have surged.

China and Saudi Arabia were the leading destinations for this increase. Shipments of Russian fuel oil and VGO to China grew by 18% month-on-month in July, totaling 0.7 million tons. China uses these imports for refining feedstock, blending them with Urals crude oil.

Saudi Arabia saw an almost doubling of its imports from Russia, reaching 0.7 million tons. This increase is primarily attributed to heightened power generation needs during the summer peak season.

Decrease in Shipments to Other Markets

In contrast, Russian fuel oil and VGO supplies to India decreased by 7% in July, falling to 0.48 million tons. Shipments to Fujairah rose significantly, reaching 320,000 tons from 200,000 tons, while exports to Turkey also increased to 264,000 tons from 95,500 tons.

Fuel oil and VGO exports to South Korea from Russian Pacific ports rose sharply to 118,000 tons, up from 36,200 tons in June. Additionally, around 295,000 tons of VGO and fuel oil were transferred via ship-to-ship loadings near Greece and Malta, with most cargoes ultimately destined for Asia.

Implications of the EU Embargo

Since the European Union’s full embargo on Russian oil products began in February 2023, Asia has become the primary market for Russian fuel oil and VGO. The shift reflects both the reorientation of Russian exports towards new markets and the strategic adjustments by importing countries to meet their energy demands.

As Russia adapts to the new market conditions, the dynamics of global oil product trade are shifting, with increasing reliance on Asian countries to absorb Russian supplies.

(Adapted from OIlPrice.com)