In May, Russia significantly increased its exports of seaborne fuel oil and vacuum gasoil to India and Turkey, as low oil product prices attracted buyers and the demand for energy surged with the onset of the hot summer season. Data indicates that oil prices have reached four-year lows due to OPEC+ accelerating its output increases, leading to concerns about an oversupply amidst a volatile demand outlook.
Since the European Union’s embargo on Russian oil products commenced in February 2023, Asian countries have emerged as primary destinations for Russia’s fuel supplies. Recent figures from LSEG reveal that shipments of dirty oil products from Russian ports to India nearly doubled from April, totaling 0.6 million metric tons in May.
Indian refineries are turning to straight-run fuel oil and vacuum gasoil from Russia as a cost-effective alternative to Urals crude oil. Despite the overall increase in Russian oil imports, notable companies in India, such as Reliance Industries and Nayara Energy, reduced their Russian oil intake by 37% and 3%, respectively, compared to April’s figures.
Turkey’s imports of Russian fuel oil and vacuum gasoil rose by 75% month-on-month in May, reaching 0.43 million tons, indicating growing dependency on Russian supplies. Saudi Arabia continued to be a significant importer of Russian seaborne fuel oil, although its imports saw a 17% decline from April, totaling 0.7 million tons.
The nation has pivoted towards discounted Russian fuel oil, especially during the summer months, due to price drops following the EU embargo. Besides India and Turkey, Singapore and China also ranked among the top destinations for Russian fuel oil and VGO exports in May.
In contrast, Russian fuel oil shipments to Asia via the African Cape of Good Hope dropped to approximately 85,000 tons in May, the lowest quantity observed this year. Since December 2022, traders have been rerouting Russian oil products around Africa to steer clear of the Red Sea, which has become risky due to potential attacks from Yemen’s Iran-aligned Houthi group.
Moreover, heightened military tensions between Iran and Israel may compel shipowners to further avoid Red Sea routes while heading towards Asian markets.