Analysis: India and the tanker market

India’s oil demand growth has long been overshadowed by China. Boosted by a larger population and a rampant economy, China had the faster GDP growth.

This may change, noted Poten. “India’s population is growing much faster than China’s. International organisations such as the World Bank and the United Nations estimate that India’s current population growth rate is in the range of 1.2-1.3%, while China’s population growth has slowed to about 0.5% per annum.”

At these rates of growth, India’s population could overtake China in 2022 and by 2030, India’s population could be 50-100M larger than China.

But traditionally India has sourced crude oil from the Middle East, a relatively shorthaul voyage, and even the increase in demand from the growing population would not have the same impact on tanker tonne-mile demand as it did in China.

The Indian Government has asked refineries to diversify supply away from the dependence on Middle East sources, which has averaged 63% of Indian imports between 2015 and 2020.

That change is already happening, noted Poten. Indian imports of crude oil from the Americas have risen in Q1 2021 to over 20% from a previous average of 15%. The increase is mainly from the US Gulf. At the same time, Middle East imports have dropped to 56%.

This seemingly small change toward supplies from the Americas has a big impact on tonne-mile demand, but expectations need to be tempered by the practicalities of the Middle East’s nearness to India. The Middle East will always have a role in reacting quicker to short-term increases in Indian crude oil demand and the refineries in India were designed around the specification of crude oils from the Middle East.

In terms of tonne-mile demand, the Middle East generates only 20% of India’s pull on tonne-miles due to its close proximity. The Americas is more than double (44%), due to the distances involved in steaming from the Atlantic Basin.

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