Naphtha Buyers in Asia Shun Russia-Linked Refiner Post-EU Sanctions
Naphtha buyers in Asia are shying away from a Russia-linked refinery’s cargoes following sanctions imposed by the European Union on Friday, while weak market fundamentals have also contributed to the buying apathy, sources said.
The EU has added India’s Nayara Energy to its list of sanctioned entities as it is major refiner of Russian crude oil and “involved in an economic sector providing a substantial source of revenue to the Government of the Russian Federation”, as OPIS previously reported. Russia’s state-run oil company, Rosneft, holds a 49% stake in the company.
The EU’s move has fueled concerns across the oil markets, where participants are avoiding dealings with the refinery, as evidenced by sparse buying. A spot tender raised by Nayara Energy this Monday — offering up to 35,000 metric tons of naphtha for Aug. 14-18 loading from Vadinar — reportedly received minimal buying interest, with sources noting the cancellation of tender as a result. The tender closed on Monday with same-day validity.
Nayara sought advance payment or a letter of credit from the potential buyer, sources said. Typically, payments are made by buyers 15-30 days after cargo loadings.
“Who would dare to trade with them?” a Singapore-based trader said, alluding to the risks involved in the spot purchase.
Although most of the refiner’s naphtha supplies are traded within Asia, and the sanction effects are mainly felt in Europe, fears of secondary sanctions have dampened regional buying appetite. A raft of shipowners is also reportedly refraining from providing vessels to the sanction-hit refinery to adhere to EU restrictions.
Additionally, a deluge of volumes from the west has been making its way into Asia, leaving most naphtha crackers sitting on abundant inventories presently, further keeping buying activities at bay.
“If the discount is deep enough to attract demand, some buyers will probably step in to take advantage of it,” a Singapore-based industry source said, adding that minimal demand in the spot market has also subdued buying.
The CFR Japan open specification naphtha first-half September/H1 October spread shrank from $10s/mt backwardation in June to just $0.25/mt backwardation as of July 23, indicating weaker prompt market fundamentals.
With industry participants — from buyers to shipowners — shunning the Russia-linked refinery, market sources are expecting trade flow shifts to some extent.
“I would think Nayara would keep their sales more domestic, and some reshuffling of flows could be done through [Indian refiner] Reliance,” an analyst source said.
Nayara was acquired by Rosneft in 2017, but the Russian oil major was later reportedly considering selling its stake in the Indian entity due to difficulties in repatriating earnings. The recent EU ban is likely to complicate the process of divestment from Nayara, sources believe.
In a statement, Nayara called the EU’s decision “unjust and unilateral”, saying that it is exploring “all legal and appropriate avenues”, as OPIS previously reported.
The EU’s embargo on products made from Russian crude is set to take effect on Jan. 21, 2026.
–Reporting by Yiwen Ju, yju@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com