Russia is finding oil customers in Asia to replace European buyers blocked by sanctions, chipping away at market share from its energy allies.
From West Africa to the Middle East, OPEC+ producers feel trapped as buyers in India and China, Asia’s top growth markets, collect cheaper Russian crude. The redesigned map of global oil trade could be in place for years to come.
“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 consultancy Vanda Insights in Singapore. “There seems to be no end in sight to changing trade flows.”
Prices for Russia’s flagship Urals grade plummeted last year as Europe avoided purchases in the wake of Moscow’s war in Ukraine. Asia’s powers stepped into the void, helping lift Russia’s maritime crude exports to a post-invasion record in recent weeks.
Historically, India has relied on countries such as Iraq, Saudi Arabia and the United Arab Emirates to supply the bulk of its crude oil imports. Now these producers feel squeezed.
Since January 2022, the month before Russia invaded Ukraine, India’s oil imports from the Middle East have fallen 35% to about 1.9 million barrels a day in April, according to show data from Vortexa Ltd. Shipments from West Africa fell by the same percentage to 228,000 barrels per day over the period.
Meanwhile, India imported a record 1.9 million barrels per day of Russian crude in April, compared with just 65,000 in January last year. Russia is now competing with the Middle East as the country’s main supplier.
“This is sustainable as long as Russian prices are low,” said R. Ramachandran, former head of refineries at Bharat Petroleum Corp. “There was little demand for Urals in India before Russia’s war against Ukraine.”
The price of Urals delivered to India, including shipping costs, was almost $12 a barrel cheaper than global benchmark Dated Brent on May 15, according to Argus Media Ltd data. The discount has been reduced by about $5 over the past two months.
Change of China
China has continued to receive a steady flow of oil from the Middle East, and shipments have even increased slightly since January 2022, according to data from Vortexa.
However, Asia’s largest economy has cut its intake of West African crude by more than 40%. Shipments fell to 730,000 barrels a day in April, from 1.3 million in early 2022. Angola remains by far the largest supplier in the region.
At the same time, China’s Russian crude imports rose 80% to about 1.5 million barrels per day from early 2022.
Members of the Organization of the Petroleum Exporting Countries and their allies are not the only ones seeing their share of the Asian oil market shrink. US flows to India and European shipments to China, which include North Sea grades, have declined.
However, India and China tend to depend on the Middle East and West Africa, home to the main OPEC+ producers, for most of their crude supply.
A glut of at least 35 million barrels of Nigerian oil due to be loaded until the end of next month has so far not been sold, with a lack of Asian purchases a key cause of the build-up, according to traders.
Millions of barrels of West African crude have been stashed in trade facilities in South Africa’s central Saldanha Bay this year as Asia buys Russian oil, according to the International Energy Agency .
“Deliveries to storage appear to be West African barrels struggling to find buyers east of Suez (due to cheaper Russian crude) while Atlantic basin refineries hold,” he said this week in his latest report on the oil market.
–With assistance from Julian Lee, Sherry Su, Bill Lehane and Grant Smith.
