This exclusive Russia report focuses on Russian crude flows to China and India, assessing the impact on flows and freight from recent developments in US sanctions and India’s policy towards Russian tankers.
Key report takeaways
Sanctions impact muted as Asia’s Russian crude imports rise; China’s record Sokol imports supported by 40% SCF utilisation
Sokol floating storage plummets as barrels arrive in China; one Sokol-laden tanker in November remains in floating storage
Almost half of China’s Sokol imports in March are from sanctioned tankers diverted from India; one tanker laden for six months
Reliance stopping Russian crude imports on SCF fleet only impacts 5% of India’s total Russian crude imports
Russian crude exports on SCF fleet to India decline 300kbd from 2023 average; exports on SCF fleet shift towards China
Urals diversion spotted after Indian refiners’ voice shifting preferences, but plenty cargo still moving as usual
Conclusions: India’s likely SCF ban complicates imports from Russia, but sales are likely to continue with deeper discounts
India’s import of Russian crude averaged slightly below 1.4mbd so far in Q1 2024, down by nearly 600kbd from the peak quarter in Q2 2023
➔ This is clearly linked to commercial and logistical hiccups, with payment issues and tanker sanctions playing a role
➔ Example: the lengthy rerouting of Sokol crude to China
Bloomberg news that Indian buyers would refrain from accepting SCF tankers in the future underpin the impact of US/western sanctions
➔ However, the share of crude on SCF-linked tankers has already come down drastically over recent months
An alternative explanation for lower flows to India is the potential push for compliance with the price cap, while sellers are likely to seek for outlets that accept higher but still substantially discounted prices
Overall, Russia continues to struggle to place all its barrels, but China’s willingness to take more Russian oil, as illustrated by the recent surge in imports, is clearly helping out
➔ Ultimately Russian oil will continue to hit markets, but potentially at growing discounts
Data Source: Vortexa