Russia Redirects Fuel Oil Exports to Saudi Arabia and India

In July 2023, Russia’s fuel oil exports predominantly flowed to Saudi Arabia and India as the country adapts to Western import bans and embargoes. With the European Union and other Western nations prohibiting Russian oil products since 2023, Moscow has shifted its focus to Asian and Middle Eastern markets. This strategic pivot underscores the ongoing demand for Russian fuel oil and vacuum gasoil (VGO) in these regions.

Saudi Arabia emerged as the largest buyer of Russian fuel oil last month, receiving approximately 1.1 million metric tons. This figure remained stable compared to shipments in June, according to data from LSEG cited by Reuters. The Kingdom utilizes fuel oil in its power plants to meet the soaring demand for air conditioning during the intense summer heat. By opting for low-cost petroleum products, Saudi Arabia can conserve its own crude oil for export purposes.

India also saw a significant increase in Russian fuel oil shipments during July. The departures of fuel oil and VGO cargoes destined for India surged to around 600,000 tons, reflecting a 65% increase from June. Indian refiners have adopted fuel oil and vacuum gasoil as cost-effective alternatives for feedstock at their refineries.

The uptick in shipments from Russia to India can be attributed in part to a narrowing price gap between Russian Urals crude and Brent crude during July. The discount for Urals oil destined for India fell to between $1.70 and $2.00 per barrel below dated Brent, marking the tightest spread since Russia’s invasion of Ukraine in 2022. This decrease in price disparity has reinvigorated interest among Indian refiners in sourcing Russian crude at competitive rates.

As Russia continues to navigate the challenges posed by Western sanctions, the reliance on Asian markets like Saudi Arabia and India highlights a significant shift in global oil trade dynamics. The adjustments in purchasing patterns are indicative of both nations’ strategies to leverage Russian resources amid ongoing geopolitical tensions.

Overall, the developments in July illustrate Russia’s ability to adapt its fuel oil exports, with Saudi Arabia and India playing vital roles in sustaining this trade.