After US eases sanctions, Russian oil demand rebounds, India has purchased 60 million barrels of Russian oil

The temporary exemption from U.S. sanctions on Russian crude oil is reshaping Asia’s oil procurement landscape. According to Xinhua News Agency, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a general license later on the 12th, announcing a temporary relaxation of sanctions on Russian oil to address the energy market disruptions caused by the blockage of shipping through the Strait of Hormuz.

Media reports on the 25th indicated that Indian refiners have purchased approximately 60 million barrels of Russian crude oil for April delivery, reaching a recent high in procurement. The supply gap caused by tensions in the Strait of Hormuz has thus been partially filled.

The purchase prices for these cargos are at a premium of $5 to $15 per barrel over Brent crude. Data from intelligence firm Kpler shows that this volume is roughly the same as in March but more than double the amount from February. Officials in New Delhi expect that as long as the disruption in the Strait of Hormuz continues, U.S. exemptions will be extended.

Russia is benefiting significantly from this demand rebound. Reports indicate that Kremlin’s crude oil export revenues have risen to their highest levels since March 2022.

Exemption Implemented, Indian Refiners Return to Russian Oil Market

The sanctions exemption issued by the U.S. Department of the Treasury allows India to receive Russian crude oil that was loaded before March 5, to compensate for the supply shortfall caused by the actual closure of the Strait of Hormuz. The exemption has since been expanded to other countries and updated to permit the purchase of oil that was on the sea before March 12.

According to sources cited by media, refiners that had ceased purchasing Russian oil since December last year, including Mangalore Refinery & Petrochemicals Ltd. and Hindustan Mittal Energy Ltd., have now re-entered the market.

India relies heavily on oil imports. After the Russia-Ukraine conflict erupted, India began大量采购折价的俄罗斯原油，一度成为俄油的主要买家。然而去年下半年以来，在美国施压下，印度大幅削减俄油采购，转而增加从沙特阿拉伯和伊拉克的进口——而这部分原油中的大量货物，随后因中东战争爆发而被困于波斯湾内。

In actively utilizing the Russian oil exemption, Indian refiners are also expanding other supply sources. According to Kpler, India has pre-ordered about 8 million barrels of Venezuelan crude for April arrivals, the highest level since October 2020.

Russian Oil Drawdown Accelerates, Iran Floating Storage Remains High

Contrasting sharply with the rapid rebound in Russian oil demand, Iranian oil flows remain stagnant.

According to Bloomberg vessel tracking data, about 18 Russian oil tankers with roughly 13.5 million barrels are available east of the Suez Canal, a significant decrease from about 25 ships and 19 million barrels two weeks ago, covering the volume of cargo that has entered the region via the Suez during that period. Seven of these ships are carrying Urals crude, which is similar in quality to Middle Eastern oil affected by the war.

In comparison, data from Vortexa Ltd. shows that Iran’s floating storage has remained around 27 million barrels since last Friday’s exemption, with little change. State-owned Indian companies remain on the sidelines due to obstacles in payment, insurance, and finding compliant vessels.

Vandana Hari, founder of Singapore-based consultancy Vanda Insights, said: “I expect countries will be more cautious when purchasing Iranian crude under the U.S. exemption framework than when buying Russian oil. Concerns about the quality of Iranian oil and issues with payment mechanisms are not as prominent with Russian oil.”

Risk Warning and Disclaimer

Market risks are inherent; investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Investment carries risks, and responsibility rests with the individual investor.