India has bought 30 million barrels of Russian crude in the wake of the US decision allowing purchase if the oil had been loaded onto ships before March 5. Public sector refiner Indian Oil had bought 10 million barrels on the spot market, according to various reports. Reliance chipped in with another 10 million barrels.
There are reports of tankers laden with Russian oil heading for Singapore now turning to Indian ports as news of the US decision got around.
Reports put the figure of Russian crude on the high seas at 138 million barrels and there could be stiff competition for them given the supply squeeze due to the Iran war. But the discount may no longer apply, in fact reports suggest buyers are paying a premium from $2 to $8 per barrel.
With the Strait of Hormuz shut, through which passes an estimated 20% of the world’s supply of oil and gas, the ban on Russian oil is expected to ease shortages. But it adds to the uncertainty given no indication when this war could end.
Some oil continues to flow through pipelines built specifically for use during emergencies, such as the current one. Saudi Arabia has a pipeline running from its oil-producing east to the port of Yanbu on the Red Sea. It has a reported capacity of seven million barrels although currently it maybe moving around 5 million barrels.
The second is the Habshan-Fujairah pipeline in the UAE which transports crude from Abu Dhabi to the Gulf of Oman, which is outside the Strait of Hormuz. This pipeline can transport 1.8 million barrels per day.
A report in the Financial Times quoted the head of Saudi Aramco Amin Nasser as saying that the amount flowing through pipelines could be increased to 70%, thereby ensuring near normalcy in oil deliveries. The bypass lines don’t fix the problem but they ensure oil continues to flow and there’s no panic.
