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Ongoing US investigations into Russian ships carrying oil to India threaten to disrupt flows this month even as Indian purchases of Russian crude rose 7 per cent in November from October, according to ship tracking data and industry sources.
Discounts on Russian crude, averaging $4.50-$5/bbl, are threatened by rising freight rates for tankers transporting oil to India. Ship brokers were quoting up to $12/bbl for transporting Russian oil to India around 10 days back, 50 per cent higher from $8/bbl levels seen last month, Mumbai-based refining officials said. The rise in rates was in response to the US blacklisting five tankers carrying Russian oil to India. Transport costs have since stabilised to around $9.5/bbl after Washington did not escalate actions.
Higher freight rates typically narrow discounts, industry sources said, but there’s little room for further tightening because at $3-$4/bbl discounts Gulf crudes are more attractive to refiners compared to Russian benchmark Urals grade. Discounts were $7-8/bbl for September loadings, and as high as $12-$13/bbl at the beginning of the year.
US investigations may affect loadings for December, the officials said, sending Russian supplies lower to below 1.5 million barrels per day levels. It all depends on how serious Washington is on derailing exports of Russian oil, a Mumbai-based refining official said.
India's crude imports from Russia rose to 1.69 million b/d last month from 1.58 million b/d in October, according to loading data from Paris-based market intelligence agency Kpler. Iraqi supplies rose by around 21 per cent to 1.02 million b/d in November from a month earlier, while shipments of more expensive Saudi Arabian grades fell by 23 per cent to 678,000 b/d.
The share of Russian supplies in India's overall crude import basket rose to 38 per cent in November from 36 per cent in October, but was lower from 43 per cent in September. Indian Oil imported 505,000 b/d from Russia in November followed by Reliance Industries at 305,000 b/d, and Bharat Petroleum at 254,000 b/d, according to Kpler.
Moves by Washington to enforce the price cap strictly in October by opening investigations into five tankers transporting Russian oil has created concerns among refiners and traders. Traders of Russian crude told refining officials that the sudden surge in transport costs eats into their margins and may affect discounts. If Washington blacklists additional tankers, freight rates may rise and discounts will shrink, hurting Indian imports of Russian oil, industry officials said.
The pressure on Russian oil sales arose after the US stepped up efforts to enforce the price cap. The US Treasury Department blacklisted owners of three oil tankers — Ligovsky Prospect, Kazan, and NS Century — that are suspected of violating the G7 price cap of $60/bbl. In October, the US had blacklisted owners of the SCF Primorye and the Yasa Golden Bosphorus tankers, the first such attempt to enforce the cap. Washington has also sent out notices to some 30 owners and managers of oil tankers to check on their compliance with the price cap and warned the shipping industry against any violations, US market publication Energy Intelligence reported.
Separately, the EU is preparing to ratify a 12th package of sanctions, which emphasises enforcing existing restrictions for Russian oil shipments. The bloc aims to require more detailed attestations from ships that transport Russian crude oil, and considering blocking sales of older tankers to prevent Russia from expanding the so-called “shadow fleet”. And oil tankers carrying Russian crude could face inspections by Denmark in the Danish straits.
Russian shipments rose in November after prices of Russia’s benchmark Urals grade declined sharply from October levels. Urals traded at over $80 /bbl in September and October, according to Russian finance ministry data, but has fallen to $65/bbl levels in mid-November, according to price reporting agencies. Indian refining officials said that it was typical for traders of Russian oil to present invoices showing FOB price of Urals below $60/bbl to facilitate payments by banks, a price cap imposed by G7 nations on Russian oil sales beyond which sanctions apply.
