India’s crude oil imports from Russia climbed in May to hit the highest in 10 months due to reduced refining capacity in Moscow following multiple Ukrainian drone attacks on Russian refineries in recent months. Additionally, Indian government-owned Oil Marketing Companies (OMCs) and private refiners got a discount on lifting Russian crude oil, and most importantly the liberty to pay in roubles, thus avoiding the need for US dollars.
Reports quoting the Brussels-headquartered global trade intelligence firm, Kpler, showed India’s import of Russian crude oil imports at 1.96 million barrels per day (bpd) in May 2024, the highest since July 2023, and approximately 3 percent increase from the figure reported in April 2024. The commodity markets analytics firm Kpler reported the fifth consecutive month of sustained increase in the Russian crude oil imported volume in May 2024.
India’s crude oil imports from Saudi Arabia, once the biggest supplier, slumped by almost 13 percent sequentially to 0.55 million tpd, the lowest since September 2023. Saudi Arabia has slipped to the third position in the list of India’s crude oil suppliers. The decline in crude oil import from Saudi Arabia was largely attributed to ample availability of Russian crude which continued to offer a price advantage over oil from Riyadh.
| India’s crude oil imports in May 2024 |
| Supplier | Volume (‘000 barrels per day or bpd) |
| Russia | 1959 |
| Iraq | 961 |
| Saudi Arabia | 546 |
| United Arab Emirates | 355 |
| United States | 210 |
| Others | 759 |
| Total | 4791 |
Sources: Kpler, and Polymerupdate Research
Viktor Katona, Head of crude oil analysis at Kpler, stated, “The operating capacity of Russian refineries has been counter-seasonally low because of the Ukrainian drone strikes, so there was more crude going into the wider markets for exports. Indian refiners’ decision to minimize imports from Saudi Arabia is solely a commercial decision, reflecting the fact that there remains a US$5-6 a barrel difference between the pricing of Saudi Arabia and Russian barrels. So, it is direct displacement (of Saudi Arabian crude.”
During the upsurge in refinery maintenance in September 2023, India imported a low volume of 0.48 million bpd of crude oil from Saudi Arabia. India’s operating refining capacity stood lower with some refineries remaining out of action in September 2023. As a result of this, the crude oil demand in India remained subdued. However, the energy demand picked up later gradually with the onset of the winter season in India and the restoration of factory activities.
Supply of Russian UralNoticeably, the supply of medium-sour Urals crude, Russia’s flagship crude grade and the mainstay of India’s Russian oil purchases, to Indian refiners touched a record high at 1.53 million bpd in May 2024, accounting for over 78 percent of India’s Russian oil purchase. However, the significant price differential between the Russian Ural and the competing grade of crude oil from the West Asian countries, favoured Indian refiners to prefer the import of energy from Russia. Russia accounted for almost 41 percent of the total 4.79 million bpd of crude oil imported into India in May 2024.
This was the second month in continuation when Russian oil accounted for over 40 percent of the market share in Indian crude imports. After reaching the peak of 46 percent of the market share in Indian oil, the share of Russian oil declined to around 33 percent by the end of December 2023 due perhaps to the declining discount offer and disruptions in the movement of merchant ships in the Red Sea following continuous pirates’ attacks. Later, Russia increased supply and thus increased the market share in the Indian crude oil market. Iraq, India’s second-largest source of crude, accounted for approximately 20 percent of the market share, followed by 11.4 percent of Saudi Arabia in May 2024.
The United States stood as the fifth largest crude oil supplier to India, marking the biggest volume of import from the world’s No 1 producer and consumer of crude oil in 10 months. Indian refiners imported a total volume of 0.21 million bpd of crude oil from the United States in May, a rise of 4.5 percent from April 2024 and the highest since July 2023. Here again, the increase in the United States crude oil supply was attributed to the pricing. American crude oil proved relatively cheaper than comparable grades from West Asia. India mostly imports light sweet grades of crude oil from the United States, which finds application in blending with heavier oil from Russia, Iraq, and Saudi Arabia. The price arbitrage works out in favour of the import from the United States when compared with the prevailing benchmark of Dubai crude oil. The commercial advantage indicates the benefit in importing crude oil aggressively from the United States.
| Share of top 10 countries in India’s crude oil import basket (%) |
| Country | 2021-22 | 2022-23 |
| Iraq | 24.8 | 20.6 |
| Russia | 2.0 | 19.3 |
| Saudi Arabia | 18.7 | 17.9 |
| United Arab Emirates | 10.0 | 10.3 |
| Kuwait | 6.5 | 4.9 |
| Nigeria | 7.0 | 3.7 |
| Angola | 1.6 | 2.0 |
| Mexico | 2.8 | 1.8 |
| Oman | 2.9 | 1.6 |
| Brazil | 1.8 | 1.2 |
Source: Centre for Monitoring Indian Economy (CMIE)
Iraq and Saudi Arabia as the erstwhile market leaderBefore the Russian invasion of Ukraine in February 2022 and followed by Western Nations’ sanctions on Moscow, Iraq and Saudi Arabia were leaders in crude oil supply to India. Following sanctions on Russia, the Western countries started waning themselves off Russian energy supplies despite Europe being heavily dependent on Russia for crude oil and natural gas. Some small European countries were dependent up to 100 percent of the energy supply from Russia. Until the Ukraine War India used to import a meagre volume of 1 percent of New Delhi’s energy requirement from Russia, due primarily to geographical disadvantages with long gestation periods and difficulties in merchant shipping.
However, Western sanctions forced Russian producers to explore alternative markets of which India topped the list. To lure Indian refiners, Russia started offering discounts to make its oil competitive compared to Iraq and Saudi Arabia. As the world’s third-biggest consumer of crude oil after the United States, the leader, and China, the second biggest consumer, India turned towards Russian oil as a pure business decision. India is extremely sensitive to oil prices due to the import dependency level of over 85 percent. India meets less than 15 percent of crude oil demand through internal sources. Although trade sources have indicated a substantial decline in discounts in recent months, Indian refiners remained keen on buying Russian crude oil due to significant savings even with low discounts. Additionally, the Indian government has requested domestic refiners to increase the import from Russia for payment in Russian roubles.
Reliance Industries inks rouble payment contract with RosneftMukesh Ambani-controlled Reliance Industries Ltd has signed a one-year deal with Russia’s Rosneft to buy at least 3 million barrels of crude oil a month in roubles. The move comes after India expressed willingness to purchase at least a third of the country’s crude oil demand of approximately 5.02 million barrels per day from Russia this year and the Russian government asked its trade partners to look for alternatives to the Western (the United States and the European Union) sanctions. Under the terms of the deal, which began on April 1, 2024, Reliance will buy two cargoes of about one million barrels of Urals crude with an option to buy four more each month at a discount of US$3 a barrel to the Middle East Dubai benchmark. Additionally, Reliance will purchase one to two cargoes a month of low-sulphur crude oil, mainly ESPO Blend exported from the Russia Pacific port of Kozmino, at a premium of US$1 a barrel to Dubai quotes.
According to reports, Reliance has agreed to make payment for the oil using Russia’s rouble. This term deal also helps privately run Reliance Industries secure oil at a discounted rate at a time when the Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) group of oil producers is expected to extend 2.2 million barrels per day (bpd) of voluntary supply cuts beyond June. India is a strategic partner of Rosneft oil company. Cooperation with Indian companies includes projects in the field of production, oil refining, and trading of oil and petroleum products. Indian refiners made payments to Russian suppliers even in the rupee, dirhams, and Chinese yuan for Russian oil.
Economic growth to drive fuel demandIndia’s role in global oil markets is expected to expand substantially by the end of this decade due to strong gross domestic product (GDP) growth, the growing population dominated by 40 percent of citizens aged between 25 and 45 years, and demographics. These wide-ranging changes will impact global oil markets, according to the International Energy Agency (IEA). India’s gross domestic product (GDP) growth was reported at 8.2 percent in the financial year 2023-24 (April-March).
Meanwhile, the IEA finds geographic dispersion perhaps even more significant as countries embark on their transition paths from very different starting points. India will become the largest source of global oil demand growth until 2030, while growth in developed economies and China initially slows and then subsequently goes into reverse. Urbanisation, industrialisation, the emergence of a wealthier middle-class being keen on mobility and tourism, plus efforts to achieve greater access to clean cooking, will underpin the expansion in oil demand. Consequently, India is on track to post an increase of almost 1.2 million barrels per day (bpd), accounting for more than one-third of the projected 3.2 million bpd global gains, to reach 6.6 million bpd by 2030.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
