One of the main results of the Russian attack on Ukraine and the subsequent sanctions is that the world has divided into two sections as global trade patterns in oil, gas, and coal have changed. Some countries continue to import from Russia, while others have completely or partially cut ties and begun importing from other nations. Although European countries still import Russian oil in some manner despite the sanctions, there is another division: they have shifted from purchasing Russian gas via pipelines to buying liquefied natural gas (LNG) from Russia, and from buying Russian gasoline and diesel to procuring them from China, India, and some Gulf states.
There are, however, new and important developments in oil markets, particularly concerning imports by India and China from Russia, Saudi Arabia, and Iran. India distinguishes itself due to its high economic growth rates, which have significantly increased its demand for oil. Data released by Reuters indicates that fuel demand in India rose by 5% in February, reaching a historical high according to Indian government statistics. This was bolstered by independent refining companies importing additional quantities of Russian crude oil for re-export as petroleum products. The data indicates a rise in petroleum product exports from India to Europe. It is worth noting that the European ban on Russian oil does not include re-refined petroleum products from other countries, which is a strategy employed by Europeans to acquire petroleum products while pretending to punish Russia. In other words, the process of “washing” Russian oil is officially acceptable in Europe according to the sanctions agreement.
Before the Russian attack, India imported around 100,000 barrels per day from Russia, with Iraq being its primary exporter. However, substantial discounts on Russian oil prompted India to significantly increase its imports from Russia month by month, reaching about two million barrels per day. Data from Kepler, a company that specializes in monitoring global ship movements, shows that India's average imports from Russia in the first quarter of this year amounted to 1.7 million barrels per day. Iraq ranked second with about 949,000 barrels per day, followed by Saudi Arabia with 829,000 barrels per day.
What’s new in the oil markets?
Even though the increase in India's imports from Russia has partially come at the expense of Iraq, the biggest loser is the United States, as Indian imports from the U.S. dropped from about 500,000 barrels per day in January to around 100,000 barrels per day in March. A similar decline occurred last summer when U.S. imports fell to approximately 200,000 barrels per day, but U.S. State Department intervention led to an increase in India’s imports from the U.S. What is the American stance now? They advocated for India, stating that it purchases Russian oil below the price cap in exchange for U.S. oil, but now these imports have decreased.
While China has increased its imports of Russian oil, both directly and indirectly, there has been a notable rise in China's imports of oil from Saudi Arabia and Iran following the announcement of a diplomatic agreement between Riyadh and Tehran under Beijing's auspices. Chinese oil imports from Saudi Arabia surged from 1.4 million barrels per day in February to 1.86 million barrels per day in March, an increase of nearly half a million barrels per day. Meanwhile, China's imports from Iran rose from 758,000 barrels per day to 973,000 barrels per day, exceeding a 200,000 barrels per day increase. The rise in March is notably similar for both countries, especially considering Iranian oil that arrives in China via other nations.
Although political factors cannot be overlooked regarding China's increased imports from both Saudi Arabia and Iran, some specialists have pointed out that Iranian oil is sold at larger discounts compared to Russian oil, leading to demand, particularly from independent refineries in China. It is therefore expected that Chinese demand for Iranian oil will increase. Furthermore, the recent rise in China's imports from Saudi Arabia brought the import level in March back to what it was in December, indicating that there is nothing new in this increase. However, if this is the case, why did China increase its imports from Saudi Arabia when prices there are higher than elsewhere? If we analyze the import levels over the months, it is noted that they have only reached this level in five months since early 2020, mostly during a period of falling prices in 2020 and early 2021.
In summary, whether the issue is political or economic, the losses of Gulf states regarding their market shares due to Russia redirecting its oil to Asia remain limited, and the biggest loser of market share is the United States, despite its crude oil exports reaching historical levels in recent months.
