Tankers with Russian oil shunned by India pile up off China coast

By Rong Wei Neo and Yongchang Chin

 

A growing number of ships laden with Russia’s Urals oil are piling up off China, in the hope that independent refiners there will take the crude as Indian demand ebbs due to US sanctions. 

 

At least five vessels carrying about 3.4 million barrels were idling in the Yellow Sea as of Wednesday, double the volume of last week and the highest level for the grade in that region in more than five years, according to data intelligence firm Kpler. The tankers are near Shandong province, where most of China’s private refiners are located. 

 

The pile-up of Urals off China is a unique situation that global oil traders are closely watching. Most of Russia’s exports of the grade, which is loaded from ports in the west of the country, usually goes to India. Chinese refiners aren’t typical buyers, as they prefer crude from the Russian Far East, which is more diesel-rich and also a lot closer to them.

 

Increased US scrutiny of Russia-to-India oil flows, as well as sanctions on major producers Rosneft PJSC and Lukoil PJSC, have in recent weeks prompted sellers of Urals to seek out other willing takers across East Asia. India’s imports of Russian oil will drop to 800,000 barrels a day this month, according to local officials, compared with a peak of 2 million barrels a day in June.

 

There are “sizable volumes of Urals looking for a home” as Indian buyers such as Reliance Industries Ltd. stay on the sidelines, said Muyu Xu, a senior crude analyst at Kpler. Russian sellers have slashed Urals prices to China to levels even lower than Iranian oil, which is drawing strong interest from refiners in Shandong, she said. 

 

At this stage, it’s not clear if the cargoes of Urals amassed off China have been sold, or whether they’re still being marketed. Tankers can make the long journey from Russia’s west without first securing a buyer. China is the obvious alternative destination for the crude, but Indonesia, where land storage is available, is another potential market.