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Explained: Why India’s crude oil price could rise following blockage of Suez Canal

The biggest impact on the oil trade and crude prices will be if the freeing of the container ship ‘Ever Given’ takes weeks, as is now being predicted. The longer the closure, the more disruptive the impact is likely to be.

Written by Pranav Mukul , Anil Sasi , Edited by Explained Desk | New Delhi |
Updated: March 30, 2021 8:38:47 am
Suez Canal, Suez Canal india impact, india crude oil Suez Canal, ever given Suez Canal, Suez Canal oil shortage, indian express, express explainedStranded container ship Ever Given, one of the world's largest container ships, is seen after it ran aground, in Suez Canal, Egypt Reuters

As the prospect of the blockage of the Suez Canal turning into the longest-ever accidental closure of this vital trade passage looms large, the resultant impact on crude and tanker rates could progressively show up in the form of higher crude prices. This could eventually trickle down in retail price terms.

Top importers of crude oil products via Suez Canal

India – the biggest importer via Suez Canal

India is the top importer of crude oil and products via the Suez Canal, higher than China, South Korea or Singapore, according to data from Vortexa, an oil and gas analytics platform. And more than two-thirds of India’s crude comes from the Gulf region.

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In an analysis of the blockade, Vortexa noted Thursday: “If the issue is not solved today it will start to have implications on the bigger trade flow and shipping sectors. If it is not solved by the coming spring tide (27/28 March) it will begin to affect refining operations on a broader scale”.

For India, though, the main hit could be seen on the import and export of ethane with the US, and the imports of crude from Latin America, the uptake of which was recently increased.

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India imports around 500,000 barrels per day of crude products via the Suez Canal, followed by China, which imports just above 400,000 barrels per day, and South Korea and Singapore, which import a little less than 400,000 barrels per day from the Suez Canal, according to Vortexa. Reportedly, at its peak in December 2020, India imported nearly 5 million barrels of crude oil per day.

Among exporters of crude products via the Suez Canal, India is sixth in the pecking order behind Russia, Saudi Arabia, Iraq, Libya and Algeria at a little less than 200,000 barrels per day.

Longer the hold-up, bigger the impact

The biggest impact on the oil trade and crude prices will be if the freeing of the container ship ‘Ever Given’ takes weeks, as is now being predicted. The longer the closure, the more disruptive the impact is likely to be.

India’s Petroleum product imports; 2/3rds comes from West Asia, rest from Africa, Europe, North America, South America and South-East Asia.

The 440 meters long, 59 meters wide ship is badly stuck, with its bow crammed into the eastern bank of the canal and its stern on the opposite bank.

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