Russian naphtha saw significant demand from India and Taiwan in June, according to data from the London Stock Exchange Group.
In a surprising turn of events, India and Taiwan have emerged as the leading destinations for Russian seaborne naphtha exports in June 2023. This shift can be attributed to two key factors: India's strategic shift towards importing cheaper Russian petroleum products amid global sanctions and supply diversifications, and Taiwan's significant increase in naphtha imports, which doubled from May to June.
Price Advantage and Sanctions Impact
India capitalised on discounted Russian crude and petroleum products, despite evolving sanctions from the US and EU that limited Russia’s export markets. These discounts initially ranged from USD 10-16/bbl, and though they narrowed, the price cap and sanctions likely encouraged continued buying as India sought cost-effective feedstock for its refining and chemical industries.
Supply Route and Geopolitical Shifts
India's crude import dependency rose to 88.2% by FY2025, with Russian oil now constituting 35% of its imports, a substantial increase from previous years. This transition was aided by alternative transport routes bypassing traditionally volatile areas like the Strait of Hormuz, reducing supply chain risk.
Volume Surge in Taiwan
Taiwan notably doubled its Russian naphtha imports in June compared to May, reaching 234,000 tonnes, demonstrating sharp demand growth likely driven by Taiwan’s petrochemical feedstock needs and diversification of supply sources amid global tightening.
Market Dynamics under EU Sanctions
The EU’s enhanced sanctions on Russian refined products, including restrictions on third-country imports, pressured traditional markets, resulting in increased flows of Russian naphtha to India and Taiwan. These countries managed to navigate these restrictions differently, partly by supplying or processing Russian-origin products internally.
Interestingly, no Russian naphtha cargoes arrived in Fujairah, United Arab Emirates in June, following 80,000 tons supplied in May. Traders have been diverting Russian oil products cargoes around Africa since December 2023 to avoid the Red Sea due to a heightened risk of attacks by Yemen's Iran-aligned Houthi group.
In May, Asia received 150,000 tons of Russian naphtha. Singapore, Malaysia, Turkey, and China were among the top destinations for Russian naphtha export supplies in June. Vessels carrying nearly 300,000 tons of Russian naphtha loaded in June are heading to Asia via the Cape of Good Hope.
In conclusion, India’s pursuit of discounted Russian naphtha to support its expanding refining sector under geopolitical constraints combined with Taiwan’s sharp increase in naphtha imports led these two to dominate as Russian naphtha buyers in June 2023.
In the light of evolving international sanctions, the finance sector plays a crucial Role in India's continuous buying of Russian naphtha, as the price advantage offered by discounted petroleum products serves as a cost-effective feedstock for their refining and chemical industries.
The energy sector in Taiwan also experienced a surge in naphtha imports, doubling from May to June, which can be attributed to the country's demand for petrochemical feedstock and efforts to diversify its supply sources amid global market tightening.
