Russia~, is recruiting oil clients in Asia to replace sanctions-blocked European buyers By clawing away at the market share of its energy partners. Producers in the OPEC+ alliance are feeling squeezed from West Africa to the Middle East as consumers in India and China — Asia’s main growing markets — snap up cheaper Russian oil. The redesigned global oil trading map could remain in place for many years. “There are many reasons for Middle Eastern producers to be concerned about losing market share in China and India to Russian barrels,” said Vandana Hari, founder of Singapore-based consultant Vanda Insights. “There appears to be no end in sight to the trade flows shift.”
Prices for Russia’s hallmark Urals grade fell last year as Europe avoided imports in the aftermath of Moscow’s conflict in Ukraine. Asia’s powerhouses rushed up to fill the hole, enabling Russia’s seaborne crude shipments to a post-invasion high in recent weeks. According to data from Vortexa Ltd., India’s oil imports from the Middle East have dropped by 35% since January 2022, the month before Russia attacked Ukraine. During the same time period, West African shipments fell by the same percentage point, to 228,000 barrels per day.
Meanwhile, India purchased 1.9 million barrels of Russian oil per day in April, up from 65,000 per day in January last year. Russia is currently competing with the Middle East to be the country’s primary supplier. “This is sustainable as long as Russian prices are low,” R. Ramachandran, former director of refineries at Bharat Petroleum Corp., said. “Prior to Russia’s war on Ukraine, there was little demand for Urals in India.”
According to Argus Media Ltd. data, the price of Urals supplied to India, including shipping costs, was about $12 per barrel lower than the worldwide Dated Brent benchmark on May 15. Over the previous two months, the discount has shrunk by around $5. According to Vortexa statistics, China has continued to receive a steady flow of oil from the Middle East, with exports even increasing slightly since January 2022. However, the greatest economy in Asia has reduced its consumption of West African crude by more than 40%. Shipments fell from 1.3 million barrels per day in early 2022 to 730,000 barrels per day in April. Angola is still by far the region’s top supplier.
At the same time, since early 2022, China’s imports of Russian oil have increased by 80% to almost 1.5 million barrels per day. Members of the Organization of Petroleum Exporting Countries and their allies aren’t the only ones whose share of the Asian oil market is shrinking. US shipments to India have decreased, as have European shipments to China, which include North Sea grades. However, India and China traditionally source the majority of their crude supply from the Middle East and West Africa, which are home to significant OPEC+ producers.
According to dealers, a glut of at least 35 million barrels of Nigerian oil ready for loading through the end of next month has gone unsold, with a lack of Asian buying being a major source of the buildup. According to the International Energy Agency, millions of barrels of West African petroleum have been stored in commercial facilities in South Africa’s Saldanha Bay hub this year as Asia purchases Russian oil instead. “The deliveries into storage appear to be West African barrels struggling to find buyers east of Suez (due to cheaper Russian crude) while Atlantic Basin refiners undergo maintenance,” the company noted in its monthly Oil Market Report this week.
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