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Russia’s Seaborne Crude Flows Decline as Cuts are Implemented, Impacting Global Markets

Russia’s seaborne crude flows from Baltic and Black Sea ports have dropped to the lowest level in seven months as the country belatedly implements the production cuts it promised for March.

Shipments from key ports like Primorsk, Ust-Luga, and Novorossiysk have fallen significantly, leading to a nationwide decline in crude shipments. The reduced availability of Russian crude, combined with lower barrels from the Middle East, has resulted in narrower discounts for ESPO crude deliveries to Chinese buyers and decreased attractiveness to Indian refiners, who are now in talks with traditional Middle East exporters for increased purchases.

The decline in Russian crude flows is in line with Moscow’s pledge to keep supply off the global market as part of the OPEC+ producer coalition. While seaborne exports initially continued to rise despite the announcement of production cuts, the recent drop in flows indicates that Russia is now honoring its commitment.

The price of Urals has increased and surpassed the G7 nations’ price cap as a result of the decrease in Russian crude availability. Crude prices above this threshold may complicate shipments, as Russian crude cannot be transported on Western ships or use Western services. Buyers would be forced to utilize the shadow fleet of vessels operating without Western insurance or other services.

The impact of the decline in flows is particularly felt in shipments to Asia, which remain near their lowest levels since mid-January. Overall seaborne exports to Asian countries have fallen significantly on a four-week average basis since mid-May.

As Russia’s crude flows adjust to the production cuts, global markets are witnessing changes in pricing and trading patterns. Industry participants are closely monitoring the situation, and shipping companies that rely on Western services may experience delays as a result of compliance checks with the G7 price cap.

The implications of the reduced crude flows continue to be assessed, especially as demand and geopolitical factors play crucial roles in shaping the oil market’s future dynamics.

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