India-bound ship carrying Iranian oil reroutes to China midway
What's the story
The Aframax tanker Ping Shun, which was earlier signaling Vadinar in Gujarat as its destination, has now changed course to Dongying in China. The vessel was supposed to deliver India's first Iranian crude cargo since 2019. The change is believed to be payment-related, with sellers tightening terms and moving away from earlier 30-60 day credit windows toward upfront or near-term settlements.
Payment issues
Shift in destination linked to payment-related issues
Sumit Ritolia, Lead Research Analyst at Kpler, said the shift in destination is linked to payment-related concerns. He said sellers are now favoring upfront or near-term payments over earlier credit arrangements. "While such mid-voyage destination changes are not unprecedented with Iranian crudes, they highlight the increasing sensitivity of trade flows to financial terms and counterparty risk," Ritolia added.
Import halt
India halted Iranian crude imports in May 2019
India's imports of Iranian crude were stopped in May 2019 after the US tightened sanctions on Iran's oil exports. Before this, India was a major buyer of Iranian oil, importing around 518,000 barrels per day in 2018. The volume dropped to 268,000 bpd during a temporary sanctions waiver period in early 2019 before stopping completely.
Trade barriers
Financial constraints continue to be a major hurdle
Despite a recent US waiver allowing limited purchases of Iranian oil at sea for 30 days, financial and banking constraints continue to be a major hurdle. Iran remains outside the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, complicating international payments. Previous methods, such as euro payments through intermediary banks, are no longer available. The temporary waiver is set to expire on April 19.
Storage availability
Analysts estimate around 95 million barrels of Iranian oil
Analysts estimate that around 95 million barrels of Iranian oil are currently stored on vessels at sea, some of which could be sold to countries like India. The originally indicated destination, Vadinar, is home to a major refinery operated by Nayara Energy with Russian oil major Rosneft backing it. Ping Shun is believed to be carrying approximately 600,000 barrels of oil transported from Iran's Kharg Island around March 4.