India is aggressively buying Russian crude oil at discounted prices.
According to figures from Bimco, India now sources 40 percent of its crude oil from Russia due to changing global oil trading patterns following Moscow’s invasion of Ukraine; just three years ago, oil trade there was virtually zero.
“Over the past three months, India has relied on Russia for 40 percent of its crude oil imports by sea,” said Niels Rasmussen, chief shipping analyst at the industry group.
“Year-to-date volumes have averaged 1.6 million barrels per day… a 1,000% increase compared to 2021, before Russia invaded Ukraine.”
Before the invasion, these barrels were mostly destined for the United States and the European Union, but sanctions caused these countries to avoid Russian oil while European buyers switched to crude from the Middle East.
Rasmussen said the shift had benefited Suezmax and Aframax tankers, as older tankers in these asset classes carry Russian cargo while VLCCs had been hampered.
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As a result of the changes, travel distances have also increased by 10% since the beginning of the year, while tonne-miles have increased by 8% despite a 2% decline in volume.
The barrels are also likely to be cheaper: the G7 countries have set a price cap of 60 dollars per barrel for Russian crude oil. Oil sold above this price is hardly allowed to be transported via conventional transport services.
But even if the barrels are transported on ships that do not operate in the mainstream shipping sector, Sokol crude oil sold for $70.02 a barrel on Tuesday, while West Texas Intermediate was at $7,422 a barrel and Brent was at $77.57 a barrel on Wednesday.
Tanker rates continued their annual summer low and recorded significant declines across the board.
However, Suezmax and Aframax vessels remain stronger than VLCCs, whose fleet-weighted averages are US$30,100 and US$28,200 per day, respectively, while VLCCs only earned US$29,400 per day.
