MOSCOW (Reuters) - Russia has steeply raised Urals oil supplies to India, taking market share from OPEC countries that are cutting production as part of a global pact to prop up prices, traders said and shipping reports showed on Wednesday.
Historically, Russian crude oil exports to India did not exceed 500,000 tonnes per year, but since the start of 2017 supplies have surpassed 1 million tonnes and are expected to rise further, according to the traders and reports.
India’s main crude suppliers, Saudi Arabia and Iraq, cut exports to India this year due to production curbs under the agreement between OPEC and other leading oil producers.
Iran, also a major supplier to India, is decreasing shipments due to a row over a gas field.
State oil giant Saudi Aramco will reduce oil deliveries to Asia by about 7 million barrels in June, including by 3 million barrels for India, as it consumes more crude domestically while its production remains curtailed by the OPEC pact. [nL8N1IB50Z]
“Large Urals flows to India have been one of the main new trends for Russian oil exports this year, and it was clearly triggered by OPEC cuts amid rising demand,” said a trader at a trading desk of one oil major.
A favourable Brent-Dubai DUB-EFS-1M spread, very thin since February, gives India access to a variety of Brent-linked grades, one of which is Urals.
Indian Oil Corp bought at least 4 million barrels of Urals crude for June delivery in its spot tender from Litasco and Trafigura, traders said. [nL4N1HW30G]
Three cargoes of 1 million barrels each loading from Novorossiisk will be supplied by Litasco, while Trafigura will supply 1 million barrels of Urals, they added.
Urals was also sent to India this year by Shell and Vitol, traders said. They added that Vitol was likely to ship 1 million barrels of Urals to India for June delivery as well.
Indian refiners Reliance Industries and Essar Oil also bought Urals crude this year, according to traders and shipping reports.
Russian oil supplies to India will likely increase further if and when state oil major Rosneft closes a $12 billion deal to buy India’s Essar plant. [nL8N1DB5WY]
The active buying of Urals is due to attractive prices sellers can offer to India’s refiners, which want to increase spot intake to improve their economic performance, but the trend is fragile, a trader with an Indian company said.
“All the market factors support Urals arbitrage - reasonable freight, thin Brent-Dubai, OPEC cuts - but as soon as something changes, sellers won’t be able to offer India’s refiners competitive pricing,” a trader on the Mediterranean market said.
India’s refiners are not yet ready to commit any term contracts for Urals supply, traders said.
Whether OPEC continues its production cut in the second half of the year is a key factor that will influence Urals arbitrage to India, traders said.
Reporting by Olga Yagova; Additional reporting by Nidhi Verma; Editing by Dale Hudson