Russian crude drives dark fleet demand

Dark fleet tankers and risky Suez transits are having little impact on India’s soaring imports of Russian crude, now running at 20 times the volume shipped prior to the invasion of Ukraine.

Analysis by New York broker, Poten & Partners, has revealed that Indian imports of heavily sanctioned Russian crude have increased to almost 1.8 million barrels a day (bpd), up from just 88,000 bpd prior to the invasion in February 2022.

At that time, Russia ranked ninth on India’s list of oil suppliers, with Iraq, Saudi Arabia and the UAE supplying about 60% of the country’s crude. The three Middle East nations were followed by the US and Nigeria.

Prior to the invasion, Russian crude had not been attractive to Indian refiners because of logistical constraints. None of Russia’s main export ports in the Baltic, the Black Sea or the Far East can load VLCCs, Poten pointed out, so Russian cargoes were shipped aboard Aframax and Suezmax tankers.  

However, the picture changed dramatically following the 2022 invasion when western nations imposed sanctions on Russian crude. This was largely driven by price. Until the invasion, ‘Dated Brent’ and Urals crude had traded broadly in parity but, following sanctions, ‘official’ Urals prices were an average of US$10-20 lower. Since deals involving Russian crude are shrouded in secrecy, Poten’s analysis has revealed that actual discounts could be much higher, possibly as much as US$40 a barrel.  

Much of the new Soviet crude was bought based on spot prices and arranged by Russian oil traders, many of them in Dubai, who charge ‘significant commissions’ for their services. But over recent months, the discount of Urals to Brent crude has narrowed, making the crude less attractive.

Meanwhile, the tanker trade from Russia to India has become more challenging, Poten said. Sanctions now restrict the use of Western shipping services including owners, brokers, and insurers when the Soviet crude price exceeds the ‘price cap’ of US$60 per barrel. This has forced Indian importers to rely on tankers in the so-called dark fleet – ships that may be old, poorly maintained, with dodgy crews and questionable insurance cover.

The dangers of the dark fleet have been highlighted by the recent collision between the Sao Tome and Principe VLCC Ceres I and the Singapore-registered product tanker Hafnia Nile, where the VLCC later attempted to flee the scene of the accident.

The US and EU are trying to ‘tighten the noose’ around these sanctions-busting shipowners. The availability of suitable ships could soon become a problem, possibly even limiting Russia’s export possibilities. At the same time, conflict in the Middle East is making this worse.

The dark fleet tankers on the route from Russia to India often take the shortcut through Suez, Poten said, even though the Houthis are increasing their strikes against ships in the Red Sea and Bab Al-Mandeb Straits. But the voyage round the Cape takes far longer and is much more expensive.

Despite these setbacks, Poten reports that Indian refiners are now in dialogue with Soviet suppliers on term deals, rather than spot contracts. This could reduce transaction costs by cutting out the middlemen.

“It would also suggest that the boost in ton-mile demand that has helped trigger the sustained increase in tanker rates may be here to stay,” Poten concluded.  

Courtesy: Seatrade Maritime News

 

India buys 34 million barrels Russian oil at discounted price

According to a Reuters report, India has received 34 million barrels of discounted Russian oil since Moscow invaded Ukraine on Feb 24, 2022. This has more than trebled the value of total imports from Russia, including other products, compared with the same period of 2021.

The volume of India's seaborne oil imports from Russia exclude CPC Blend oil, which is also exported via Russia's Black Sea port, but mostly supplied by Kazakhstan's subsidiaries of western countries as transit volumes.

India's oil imports from Russia have been rising since February this year, as Asia's third-largest economy and the world's third-biggest oil importer, turned to deeply discounted Russian oil, mostly Urals crude, to cut its energy imports bill.

India received more than 24 million barrels of Russian crude oil in May 2022, up from 7.2 million barrels in April and about 3 million barrels in March. The quantity is set to rise to about 28 million barrels in June.

Surging energy imports helped push India's total goods imports from Russia between February 24 and May 26 this year to US$6.4 billion, as compared to US$1.99 billion in the same period last year.

India's exports to Russia fell nearly 50% to US$377 million over that period, as its government is yet to set up a formal payment mechanism.

As the West responded to the invasion with a barrage of sanctions, India has come under fire for its continued purchases of Russian energy.

New Delhi has brushed off the criticism, saying those imports made only a fraction of the country's overall needs and has said it will keep buying cheap Russian oil, arguing a sudden stop would drive up costs for its consumers.

Russian and Indian energy companies have also been discussing term supply agreements and possible acquisitions of stakes in Russian oil and gas projects.

Former Prime Minister of Pakistan, Imran Khan has once again praised India for buying discounted oil from Russia despite being a key member of a US-led alliance called QUAD.

“Despite being part of QUAD, India sustained pressure from the US and bought discounted Russian oil to provide relief to the masses,” Khan wrote in a tweet.

“This is what our government was working to achieve with the help of an independent foreign policy,” he added.

In a second tweet, Khan claimed that for his government, “Pakistan’s interest was supreme but unfortunately the local Mir Jafars and Mir Sadiqs bowed to external pressure, forcing a regime change and are now running around like a headless chicken with the economy in a tailspin”.

Khan also tagged to his tweet a South Asia Index report, saying: “After buying discounted oil from Russia, the Indian government reduced petrol price by 9.5 Indian rupees per litre, Diesel price was also reduced by 7 rupees per litre.”

Michael Kugelman, a scholar of South Asian affairs at the Wilson Centre, Washington, also referred to this report, saying: “This is why Khan was praising India during his final days as PM.”

Khan wanted to import wheat and eventually gas from Russia.