- China imports rise as India shipments fall.
- US tariffs pressure India, but oil trade continues.
- India balances economic costs with political strategy.
Russia’s seaborne crude exports saw a slight bump in August, hitting 3.40 million barrels per day (b/d), up from 3.35 million b/d in July, according to data from S&P Global Commodities at Sea (CAS). Even with this increase, the volumes are still trailing behind the levels recorded from March to June, reports S&P Global.
Diverging Trends Between India and China
Shipments to China climbed by 12% month-over-month, reaching 1.109 million b/d in August. On the flip side, deliveries to India fell by 21%, landing at 1.30 million b/d. Analysts pointed to the influence of US secondary sanctions as a factor in the drop in India’s Russian oil imports. On August 27, the US slapped a 25% “secondary tariff” on India to curb its Russian crude purchases. Still, experts believe India will keep sourcing oil from Russia, even with the added financial burden.
“India’s government and refiners remain steadfast in the face of US pressure,” HSBC Global Investment Research said on Sept. 1.
Economic and Political Balancing for India
While it might seem that continuing to buy Russian oil doesn’t really fit with Delhi’s immediate economic goals, analysts point out that there are political considerations involved. HSBC has noted that the savings from cheaper Russian crude are actually overshadowed by the value of Indian exports to the US.
“Overall, for the market, it will likely drive Russian crude discounts higher and blends cheaper, being slightly bearish,” Rachel Ziemba, senior adviser for Horizon Engage, told Platts. Platts assessed Urals FOB Primorsk at $57.91/b on Sept. 2, an $11.53/b discount to Dated Brent, widening slightly from $11.47/b on Aug. 27. Ziemba added that, “despite tough talk from the Indian government about continuing to buy Russian crude, businesses are likely to hedge and look for other supplies.”
No Signs of Russia–Ukraine Peace Deal
The prospect of a peace deal between Russia and Ukraine seems as distant as ever. Market sentiment is still heavily influenced by the ongoing conflict, with analysts from Global Risk Management (GRM) pointing out on September 2 that Putin has shown no interest whatsoever in meeting with Zelensky. While it seems unlikely that new US sanctions will be introduced under Trump, GRM suggests that enforcing the existing ones is becoming more likely.
Oil Products Export Recovery
On a brighter note, Russian oil product exports saw a rebound in August, climbing 10% month-on-month to reach 2.31 million barrels per day (b/d) after hitting a low for several months. This recovery was mainly driven by a 33% increase in fuel oil shipments and a 6% rise in residues, according to CAS data. Exports to China skyrocketed by 79% to 291,733 b/d, while deliveries to India increased by 19% to 164,209 b/d, and shipments to Turkey rose by 9% to 522,891 b/d.
Ust-Luga Attack Disrupts Infrastructure
However, this rebound in exports faced challenges due to disruptions at Russia’s Ust-Luga terminal. On August 24, a Ukrainian strike ignited a fire at the Novatek gas processing facility located at this crucial Baltic hub, which is vital for marine fuel and residues. Although the fire was put out, it did cause some structural damage. CAS reports that Ust-Luga usually handles over half of all Russian Baltic seaport volumes.
Gasoil and Diesel Flows Remain Weak
In contrast to the positive news for fuel oil, gasoil and diesel exports remained stagnant at around 750,000 b/d in August. This followed a 4% drop in July to 754,000 b/d, with no signs of recovery in August. Shipments to key destinations continued to decline, with exports to Brazil plummeting by 34% to 80,000 b/d and flows to Turkey, which is Russia’s largest gasoil buyer, decreasing by 6% to 288,000 b/d. Meanwhile, the price differentials for Russian-origin diesel and gasoil in West Africa have narrowed, indicating tighter discounts for Russian crude and a reduction in imports.
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Source: S&P Global
