India’s government requested that domestic refiners speed up efforts to find new crude oil suppliers; with India’s crude mostly sourced from the nearby Middle East from Saudi Arabia and Iraq, a diversification will create new ton-mile demand for tankers, Poten & Partners said in its weekly opinion piece.
India is the world’s third largest oil importer, and the government’s action comes as the nation suffers the consequences of rising oil prices; India’s requests that producers increase production to limit rising prices have been unsuccessful..
There are signs that India’s refiners have acted on the government’s diversification wishes. The first quarter of 2021 saw an increase in the proportion of oil imports from the Atlantic Americas, and a drop in volumes from the Middle East to around 56% of imports.
In the five years up to the outbreak of the COVID pandemic, the Middle East accounted for an average of 63% of India’s imported crude oil, according to Lloyd’s List Intelligence data cited by Poten & Partners.
The Middle East accounted for 20% of India’s oil imports on a tanker ton-mile demand basis over the five years, said Poten & Partners, due to the proximity of origin and destination. The Atlantic Americas represented 44% of ton-mile over the same period and topped 50% in the first quarter of 2021.
“More crude from the US and a resumption of imports from Venezuela as well as from new sources such as Guyana could further boost India’s ton-mile demand,” said the report.
Switching to more distant suppliers could also incentivise a move to crude oil imports on larger vessels.
While the tanker market is currently more attuned to demand movements in China, India’s faster-growing population and new appetite for crude on more shipping-intensive routes could make the nation more important for tanker markets, said Poten & Partners.
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