Look Middle East For Indian Oil Refiners Amid Russia, Iran Sanctions

Oil refiners in India and China have ramped up crude imports from the Middle East and other regions, responding to concerns over potential restrictions on Russian and Iranian crude supplies, as per the Bloomberg report. This week, Indian state-owned refiners secured up to 6 million barrels of Oman and Abu Dhabi’s Murban crude for delivery in February, according to traders, due to a shortfall in Russian spot cargoes.

Shift in Purchasing Patterns

The surge in buying activity from Indian and Chinese buyers is partly driven by a combination of fewer and more expensive offers for Urals, ESPO, and Iranian Light crude. Traders also highlighted growing fears of additional sanctions on tankers transporting these cargoes, which could disrupt supply chains and pose risks for refiners. This shift coincides with the continuation of tighter sanctions on Russia and Iran by the US government, with Washington focusing on tanker-related restrictions and financial sanctions.

Middle Eastern Crude

As Indian and Chinese refiners seek alternative supplies, Middle Eastern crude grades have emerged as key beneficiaries. Their medium-sour quality, proximity, and availability of cargo have made them attractive options. TotalEnergies, a French oil giant, has become a significant source of prompt supplies, consolidating a range of physical cargoes through its active bids in the Platts window, including grades like Upper Zakum and Oman crude.

Regional Oil Markets Responds

The shift in purchasing patterns has impacted global oil markets. Prompt time spreads for Dubai swaps, a proxy for Middle Eastern oil prices, have risen more sharply than Brent swaps in the past month, according to PVM Oil Associates Ltd. While Russian and Iranian oil made up around a quarter of China’s crude imports in December, they accounted for nearly a third of India’s total crude purchases.

Tightening of Sanctions on Tankers

In China, particularly in Shandong, a key refining hub, state-owned and private companies have been instructed to prevent sanctioned oil tankers from docking at their terminals. These directives come in response to increased international scrutiny of tanker-related sanctions and the potential risks associated with handling Iranian and Russian crude.

Global Crude Market Impact

As global crude futures climb amid tightening US sanctions on Tehran and Moscow, Middle Eastern oil producers stand to benefit from the rising demand for their supplies. The strategic shift by Indian and Chinese refiners is reshaping the dynamics of global crude markets and highlighting the growing influence of geopolitical factors on oil trade.