As Conflict Expands To Red Sea, India’s Crude Options, Pg15

Key Highlights:

• The West Asia conflict has expanded to the Red Sea, with Yemen-based Houthi militia targeting Saudi Arabian tankers in the Bab el-Mandeb Strait.
• This critical chokepoint, connecting the Red Sea to the Gulf of Aden and the Arabian Sea, has seen a slump in vessel crossings.
• The disruption could force tankers to reroute around Africa via the Suez Canal, adding up to four weeks to journeys and elevating oil prices.
• India, which imports over 88% of its oil, is exploring Russian crude as a primary fallback option.
• India's crude imports from Russia have surged to approximately 2.6 million barrels per day (bpd), constituting over 50% of its total oil imports.

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Detailed Insights:

• The Houthi militia has specifically targeted Saudi Arabian tankers attempting to cross the Bab el-Mandeb Strait.
• Data from July 27 indicated a drop in daily vessel crossings through Bab el-Mandeb from 43 to 31.
• The Suez Canal-Red Sea route is crucial for Russian oil reaching Indian ports.
• India's diversified crude slate and commercial crude inventories offer flexibility to manage temporary supply disruptions.
• Saudi Arabia's East-West (Yanbu) pipeline provides an alternative supply buffer for India.
• Concerns exist regarding Russia's sustained export capacity due to Ukrainian attacks on its energy infrastructure, particularly the Novorossiysk's Sheskharis terminal.
• The Novorossiysk complex supplied about 28% of India’s Russian crude imports in June.
• Competition for Urals crude from China and Turkey could limit its incremental availability for India.
• The potential return of Russian refining capacity could reduce crude available for export, impacting India's supply.

Key Concepts Involved:

• Strait of Hormuz: A narrow sea passage between the Persian Gulf and the Gulf of Oman, critical for global oil shipments.
• Bab el-Mandeb Strait: A strategic chokepoint between Yemen on the Arabian Peninsula and Djibouti and Eritrea in the Horn of Africa, connecting the Red Sea to the Gulf of Aden.
• Suez Canal: An artificial sea-level waterway in Egypt, connecting the Mediterranean Sea to the Red Sea, providing the shortest maritime route between Europe and Asia.
• Urals crude: Russia's primary export crude oil blend, a medium sour crude typically traded at a discount to Brent crude.