Pandemic Cuts Russia Base Oil Exports

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Pandemic Cuts Russia Base Oil Exports
A freight train with oil tanks in motion on a railroad in Russia. © LegART / shutterstock.com

Russia base oil exports are expected to drop 12% this year, a European trader forecasts, because of a drop in demand caused by COVID-19 lockdowns in Europe and Turkey.

Russia exported 1.12 million tons of base oil in 2019. The country’s most common viscosity index grade for export is solvent neutral 150.

“For the first time in five years exports from Russia fell below 1 million tons, and it is the biggest drop since 2015,” Denis Varaksin, a base oil trader covering Russia and Central Asia at Berlin -based DYM Resources, told Lube Report last week.

Europe is the largest destination for Russian base oils, drawing almost half of total exports.

“Demand from the Russian domestic market was limited by the coronavirus pandemic lockdowns and the weaker economy,” he said.

Due to COVID-19 restrictions that included many business closings, Russian gross domestic product is expected to fall 4.1% in 2020, according to a forecast by the International Monetary Fund.

Varaksin said that a key reason for the decrease in base oil exports was a fall in demand in key export outlets during April and May.

Baltic Sea ports – including Svetly, in the Russian exclave of Kaliningrad, and the Latvian ports of Riga and Liepaja – are key outlets for Russian base oils. In 2019 47% of the country’s base oil exports passed through those ports, but the share has decreased to 31% this year, according to Varaksin. Likewise, the share of exports through Black Sea ports in Fedosia and Novorossiysk has fallen from 17% to 12%, and the share through Ukraine is down from 14% to 10%.

Varaksin said no Russian base oil plants have permanently shut down so far this year and that no new capacity has come online.

Russian oil major Lukoil is expected to produce 50% of the base oil exports loading in 2020. Its refinery in Volgograd is traditionally the largest source of base oil exports.

DYM expects the country’s base oils export to rise around 11% in 2021 back to around 1.1 million tons, assuming that demand from Europe recovers.

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