Asian Giants Retain Strong Appetite for Russian Oil

As Europe turns its back on Russian oil, India is set to keep importing high volumes of Russian crude, while China continues to snap up most of the Espo crude exported from the Kozmino terminal in Russia's Far East.

Preliminary shipping data indicate that India will import 840,000 barrels per day of Russian crude in June, but that number could go higher if more tankers ultimately head to Indian ports, said Serena Huang, head of Asia-Pacific analysis at Vortexa.

Urals Blend will make up the bulk of those volumes, but they also include small volumes of crudes such as Sakhalin Blend from Russia's Far East, Huang added.

The June estimate is relatively stable compared to May arrivals of 850,000 b/d, although the numbers for both months have soared from 360,000 b/d in April.

Data from analytics firm Kpler indicate that India will take delivery of 1 million b/d of Russian crude that was loaded in April, said a trading analyst.

Indian refiners are believed to have signed semi-term Urals contracts for the second half of the year, with volumes estimated at 400,000-600,000 b/d.

Going forward, Indian imports of Russian crude could rise even further, said an Indian trader.

"I feel there's nothing that could stop them from buying," said an Asian refiner source, who added that the Indian government appears to have cleared the way for such purchases.

Sophisticated Refineries

Indian refiners — especially those oriented more toward exports — are probably aiming for higher yields of gasoline and gasoil, said the trading analyst.

Gasoline demand is being boosted by the summer driving season in the US, while Europe needs more gasoil to replace Russian cargoes.

Indian refiners would therefore need to optimize their crude slates, which could limit how much medium, sour Urals crude some of the country's less sophisticated plants could take, the analyst added.

Highly sophisticated plants like Reliance's 1.3 million b/d Jamnagar refining complex and the 405,000 b/d Nayara refinery would be able to take more Urals, he noted.

Reliance has a total coking capacity of around 350,000 b/d that enables it to produce more middle distillates from Urals, which has a high yield of fuel oil.

Nayara — 49% owned by Russian oil giant Rosneft — has a 130,000 b/d coker and could also upgrade a lot of the fuel oil yield from Urals, the analyst noted.

Upgraded state-owned refineries like IOC's 300,000 b/d Paradip plant could also potentially handle significant volumes of Urals. Paradip has an 82,000 b/d delayed coker and is designed to produce just 5,000 b/d of fuel oil.

China Snaps Up Espo Cargoes

Meanwhile, Chinese market players probably took most of the spot Espo cargoes to be loaded in July, said two Chinese market sources and a trader who markets to Chinese independent refiners.

One of the Chinese market sources believes that 90%, if not all, of the July spot Espo cargoes probably went to Chinese buyers.

China previously snapped up almost all of the 757,000 b/d of Espo crude to be lifted in June.

Espo crude is named for the East Siberia-Pacific Ocean (Espo) pipeline that carries it to the port of Kozmino.

A Chinese market source said Russian producers could ship 36 to 40 cargoes from Kozmino in July. Another trading source said early indications suggest 37 Espo cargoes will be lifted in July.

With most Espo cargoes amounting to 733,000 bbl each, 36-40 cargoes work out to around 850,000-950,000 b/d of seaborne Espo volumes. That would be a record and would be well above the 2021 average of 700,000 b/d exported from Kozmino.