One of the balancing acts that has prevented crude oil prices from spiking higher during the Iran war has been India buying record volumes of Russian crude.
But it's getting more challenging for the world's third-biggest crude importer as top-ranked China resumes buying more from Russia amid the ongoing supply disruptions sparked by the conflict.
China's imports of seaborne Russian crude in August are estimated at 1.25 million barrels per day (bpd) by commodity analysts Kpler, down slightly from 1.423 million bpd in July.
However, July and August were the two strongest months for China's seaborne imports from Russia since April and show that China's refiners are seeking more Russian cargoes to replace barrels from the Middle East.
China has been the biggest buyer of Russian and Iranian crude in recent years as it was prepared to ignore U.S. and Western sanctions against the two producers.
But the Middle East conflict and the U.S. naval blockade of Iranian ports have resulted in sharply lower Chinese imports of Iranian crude, with Kpler estimating August arrivals at around 340,000 bpd.
This is roughly in line with July's 329,000 bpd and June's 361,000 bpd, but the past three months are about a third of the 1.14 million bpd of Iranian oil that China imported in March.
That March crude would have left Iran before the U.S. and Israel launched their aerial attacks on February 28, with the strikes prompting Tehran to effectively close the Strait of Hormuz to vessels through missile and drone strikes.
Nearly 20% of the world's crude oil and refined products moved through the narrow waterway before the conflict began, and while volumes have recovered in recent weeks they are still well below pre-war levels.
China usually sources the bulk of its Russian seaborne oil from the country's eastern ports, which supply the ESPO grade, rather than Russia's ports in Europe, which largely ship Urals crude. China also imports just under 1 million bpd of Russian crude via pipelines.
For example, in July 90% of China's imports of seaborne Russian crude were sourced from Asian ports, while in June it was 78%.
However, for August Kpler data shows that the share of crude from Russia's European ports is rising to 31%.
That matters for India, which generally receives the bulk of its Russian crude from European ports.
INDIA GETS LESS RUSSIAN OIL
India's total imports of Russian crude are estimated at 1.87 million bpd in August, down from 2.79 million bpd in July and 2.73 million bpd in June.
July and June were the two strongest months on record for India's imports from Russia, exceeding the 1.21 million bpd average for the three months leading up to the start of the Iran war.
In July, India's imports from Russia's European ports were 93.4% of its total and were 2.59 million bpd.
For August, the percentage has gone up to 97.4% as China takes more of Russia's Asian crude.
But more importantly for India's refiners, the volume of imports from Russia's European ports is estimated at 1.82 million bpd in August, down almost 30% or about 770,000 bpd.
This is showing up in India's total crude imports, which are estimated by Kpler at 4.17 million bpd for August, the lowest since the Iran conflict started and down from 5.06 million in July.
It's likely that India's August imports will be revised higher as more cargoes are assessed before the end of the month, but even so it's still clear that India is struggling to find enough crude to replace Russian barrels that are now heading to China.
This could have a potential flow-on effect for Asia's already tight markets for refined products given India is a major exporter of diesel and gasoline.
India's August exports of light and middle distillates are estimated at 1.29 million bpd, the same as for July and the two strongest months since September last year.
However, any shortage of crude for India's refiners will only show up from September onwards, and if this does result in lower fuel exports, it will exacerbate the mounting supply crisis in Asia.
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The views expressed here are those of the author, a columnist for Reuters.
