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
