India To Continue Buying Russian Oil, India’s Fuel Exports Down 15 PC

Middle Eastern crude exports dropped to 6.8 mbd last week versus 19 mbd pre-conflict. However, Russian waivers and reserve releases are cushioning the prompt market.

Continued Indian demand for discounted Urals should limit replacement buying of Atlantic Basin barrels, keeping the Brent–Dubai prices softer despite geopolitical risks, said Kpler.

India is buying less from Atlantic side – Europe, the US and Africa, which is represented by Brent crude. Currently, the price differential between Brent crude and Dubai prices is $6 to $8 per barrel, which, though higher than the usual range, is softer, considering the geo-political tensions.

A key part of that cushion is the reopening of Russian flows into India following the latest US waiver. Indian refiners are likely to continue favouring Russian crude, is landing roughly $18/bbl below the Dubai swap and $30/bbl below most Atlantic Basin replacements.

As long as supply of Russian crude remains stable, India is likely to remain heavily reliant on these barrels regardless of the time-bound waiver, reducing the urgency to compete for alternative supply.

There are also early signs that some cargo traffic may still be moving through the Strait. LPG tankers have transited the strait, indicating India’s strong relationship with Iran, which could offer an early signal of a limited reopening if crude vessels begin to follow. Reserve releases from Japan and South Korea are also keeping pressure on the prices.

Since the US–Israel war started, only 27.17 mb of crude has been shipped through the Strait of Hormuz so far in March. Of that total, 20.13 mb is Iranian crude—expected to be sold to Chinese teapot refiners—leaving only 7.04 mb of compliant barrels, or about 469 kbd.

With no sign of a wind-down in Iranian military strikes, non-Iranian oil flows through the Strait are expected to remain sporadic for the foreseeable future.

Even crude shipments from terminals outside the Strait of Hormuz are looking increasingly shaky, with Fujairah—which is capable of exporting at least 1.5 mbd of Murban crude—becoming a frequent target of Iranian strikes. While shipments from Oman appear largely normal—despite the Mina Al Fahal terminal being briefly shut down as a precaution last week—all cargoes loaded so far this month are bound for China.

Meanwhile, the fuel exports from major regional hubs are expected to remain reduced till May. Kuwait and Bahrain may see 70-90 per cent reduction, Saudi Arabia 20–35 per cent, UAE 60–80 per cent, Oman 10 per cent, and South Korea 30 per cent.

India, which also exports refined fuels, will see 15 per cent export reductions, Singapore, Taiwan, Malaysia, Australia, Indonesia 10–30 per cent, China 50–70 per cent, and Japan 30 per cent.