Russian oil shipments hit seven-month high in May as Urals stays below cap

Russia's seaborne oil exports rose to a seven-month high in May as OPEC+ producers boosted output and falling prices for the country's flagship Urals grade opened new legal trading opportunities under Western sanctions.

Russian crude shipments averaged 3.68 million b/d in May, up 165,000 b/d or 5%, from April levels to the highest since October and above average 2024 flows of 3.54 million b/d, according to S&P Global Commodities at Sea tanker tracking data.

Crude exports to Russia's biggest customers, India and China, were little changed at 1.67 million b/d and 1.11 million b/d respectively, while flows to Turkey -- the third biggest buyer -- rose by 60,000 b/d to a four-month high. A cargo of Russia's Sakhalin Blend crude was also shipped to Japan's Kikuma port, according to the data, marking the first export of Russian crude to Japan since late 2022.

OPEC+ started increasing oil output in May with a series of faster-than-expected planned monthly production hikes of 411,000 b/d. OPEC+ plans another 411,000 b/d production increase in June, with indications that a similar increase could likely occur in July.

Russia's Urals crude has traded under $60/b since April 3 due to escalating trade tensions and the acceleration of production increases by OPEC+ countries, which took the market by surprise. These factors led market watchers to lower their expectations for oil demand growth, contributing to downward pressure on global crude prices.

Price cap

The export rise in May also comes as the lower Urals price provides more legal options to ship Russian crude using Western shipping, insurance, and financial services. In April, CAS and Maritime Intelligence Risk Suite data showed a 54% jump in Russian seaborne exports by ships flagged, owned or operated by companies based in the G7 or their allies or insured by Western protection and indemnity clubs.

Urals crude loading FOB at Primorsk averaged $52.86/b in April and $51.31/b in May, down from an average of $61.65/b, according to Platts assessments. The crude grade was last assessed by Platts at $53.76/b on June 4.

Additional crude availability for export was supported by ongoing refinery maintenance. Some 645,000 b/d of Russian refining capacity remains offline as part of seasonal maintenance, freeing up additional crude cargoes for export, analysts at S&P Global Energy said in a recent note.

The price slide also comes despite EU and UK efforts to continue expanding their backlist of sanctioned ships transporting Russian oil. The EU and UK on May 20 confirmed fresh rounds of sanctions on Russia, putting over 200 ships on their blacklists and suggesting the G7 price cap could be lowered in the future.