India has significantly increased its crude oil imports from Russia, now sourcing 40% of its crude oil needs from the country, according to BIMCO. This represents an extraordinary 1000% rise compared to 2021, prior to Russia’s invasion of Ukraine.
Growth in Russian Oil Imports
Current Volumes: India is importing an average of 1.6 million barrels per day (mbpd) of crude oil from Russia year-to-date. This surge is attributed to the European Union (EU) and United States (US) sanctions imposed on Russia, which had previously been major buyers of Russian seaborne crude oil.
Market Shift: Following the sanctions, Russia has redirected its crude oil exports to new markets. India has emerged as a crucial buyer of Russia’s discounted Urals crude oil, which is traded under the G7 coalition’s price cap of $60 per barrel or less.
Impact on Global and Indian Oil Markets
Share of Imports: Russian crude oil’s share in India’s seaborne imports has grown substantially, with India becoming the largest buyer of Russian seaborne crude oil by mid-2023, accounting for 35-40% of Russia’s total seaborne exports.
Decrease in Persian Gulf Imports: India’s seaborne crude oil imports from Persian Gulf countries have declined from nearly 70% to 45%. This shift is due to the Persian Gulf region redirecting its exports to North Europe and the Mediterranean.
Implications for Shipping and Tanker Usage
Sailing Distance and Tonne Miles: The increase in Russian oil imports has led to a 10% rise in the average sailing distance for crude oil tankers and an 8% increase in total tonne miles, despite a 2% decrease in volumes. The average sailing distance has grown by 25% compared to 2021.
Tanker Types and Ship Age: The shift in import patterns has led to a higher use of Aframax and Suezmax tankers, which now account for 55% of imports. Conversely, the use of Very Large Crude Carriers (VLCCs) has decreased. Additionally, there has been an increase in the average age of ships discharging in India, with the average age rising by four years and the share of ships older than 20 years increasing from 2% to 13%.
Future Outlook
Continued Trade: BIMCO suggests that Russia-India trade is likely to maintain its current levels under the existing sanctions regime. However, the International Energy Agency (IEA) forecasts that India’s growing oil demand may eventually surpass Russia’s production capacity, potentially leading India to explore alternative suppliers.
This dramatic shift in India’s crude oil sourcing highlights the broader impacts of geopolitical tensions and sanctions on global energy markets and trading patterns.
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