Tanker Market: Lower Ton-Mile Demand Ahead?

India is expected to reduce its dependence from Russian oil in the coming weeks and months, with Middle East imports potentially increasing their share among the country’s import mix. This could lead to a reduction of ton-mile demand. In its latest weekly report, shipbroker Intermodal said that “India’s crude oil import landscape has been undergoing notable shifts, particularly with the recent 18% decline in Russian oil imports during August 2024. Following a period of increased reliance on Russian crude, driven by attractive discounts amid Western sanctions, India’s refineries have reduced their intake of Russian oil due to operational constraints, including maintenance shutdowns. Nevertheless, Russia remains India’s primary supplier, demonstrating the importance of discounted oil in India’s overall energy strategy. However, India faces competition from China, which imports Russian crude through both sea routes and pipelines, giving it greater flexibility in securing supplies. The decline in Russian imports has highlighted India’s ongoing diversification efforts, with Middle Eastern countries, particularly Iraq and Saudi Arabia, playing a pivotal role in offsetting these fluctuations”.

According to Intermodal’s Research Analyst, Mr. Fotis Kanatas, “the decline in India’s Russian oil imports in August 2024 was primarily due to maintenance at key Indian refineries. Chennai Petroleum, which operates a 210,000-barrel-per-day refinery in southern India, had to temporarily cease operations at several units for scheduled maintenance. Similarly, Bharat Petroleum Corporation’s Bina refinery in central India also reduced its crude processing due to ongoing maintenance at some of its units. These disruptions in refining capacity lowered the demand for Russian crude, underscoring the sensitivity of India’s oil import levels to domestic operational constraints”.

Mr. Kanatas added that “looking at the data, August was the second softer month regarding crude oil imports in 2024 (18,5 mt), behind only February, when India imported 18,4 mt. During 2023 and 2024 so far, India’s imports are varying in a relatively tight range of 16.4 mt to 21.1 mt and the top 2 suppliers, Russia and Middle East, are exchanging seats as india’s top suppliers. In 2024 for example, Middle East market share was decreasing steadily from January and a high of 53% to a low of just 39% in June. Conversely, Russia’s market share was at just 29% in January and rose steadily to 43% in June, where the decrease begun. At the same time, China reclaimed its position as Russia’s top oil customer in August, after India briefly overtook them as the top customer in July. China is importing Russian crude both via tankers and pipelines, whereas India is reliant on seaborne trade only”.

“In the coming months, India’s crude oil import strategy will likely continue adapting to both operational constraints and geopolitical pressures. While discounted Russian oil will remain a key part of its energy mix, growing competition with China and the need for more flexible supply chains will drive India to further diversify its sources. This could result in higher imports from the Middle East, reducing tonne-miles. Alternatively, if India chooses to source more oil from the Atlantic basin, where production is rising, it could increase global tonnage demand for longer-haul voyages”, Intermodal’s analysis concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide