Despite price cap, enough tankers to supply Russian crude to India

Early December, the G7 nations, a grouping of Western powers including the European Union, US and UK, among others, had agreed to a $60 per barrel price cap on Russian seaborne crude oil in a bid to squeeze Moscow’s income from selling oil and ensure that it doesn’t use its oil trade money to fund the war on Ukraine.

Many market participants had anticipated that the move could hit supplies to countries such as India and China, since insurers and shippers – mostly based in G7 countries – had been prohibited from handling cargoes of Russian crude unless it is sold for less than the price cap.

However, with Russia’s Urals crude consistently trading under $60 per barrel, the price cap has had no impact on supplies to India, industry insiders said. The Urals grade accounts for 80 per cent of all Russian oil imported by Indian refiners. Vortexa data showed that India received 1.01 million barrels a day of Urals crude in January.

“While several major ship owners like Trafigura and Total that were previously very active in the Russian crude trade have exited, there appears to be no shortage of Aframax and Suezmax tonnage supply from the remaining and incumbent ship owners based in Dubai, India, and Greece so far,” said Serena Huang, head of APAC analysis at oil analytics firm Vortexa.

Aframax and Suezmax are two among half-a-dozen size classifications for tankers.

According to data shared by Vortexa, Russia continued to be India’s top oil supplier in January, delivering 1.27 million barrels per day, and accounting for close to 28 per cent of India’s total crude oil imports of 4.60 million barrels per day. The supply of Russian crude to India in January rose 6.2 per cent month on month. This is the highest-ever supply of Russian oil to India in a single month.

Western buyers began shunning Russian oil following Moscow’s invasion of Ukraine almost a year ago. However, with Russia offering its oil at a discount, Indian refiners have been lapping it up.

From being a marginal supplier of crude to India before the war in Ukraine, Russia displaced the likes of Iraq and Saudi Arabia to emerge as India’s largest source of oil imports. India is the world’s third-largest consumer of crude and depends on imports to meet over 85 per cent of its needs. In January, Iraq was India’s second-biggest source of crude with an average supply volume of 0.92 million barrels per day, followed by Saudi Arabia with 0.77 million barrels per day, the data showed.

Vortexa’s Huang expects that Indian refiners, particularly private sector players Reliance Industries and Nayara Energy, will be incentivised further to refine discounted Russian crude and supply fuels, mainly diesel, to Europe, which has banned the import of fuels from Russia.

“Export-oriented private refiners will further edify themselves as key diesel suppliers to the EU after the ban on Russian oil products kicks in, giving them more incentives to slurp up Russian crude, as long as it remains attractively priced,” she said.

According to Vortexa data, private sector refiners accounted for 47.3 per cent of Russian oil volumes imported into India in January. While public sector refiners such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum do export fuels, most of their production is consumed in India. The two private sector refiners export a sizable part of their production.