India’s crude oil imports rise by 7% to record the third-highest level in April to meet growing domestic demand

India’s crude oil imports rose by 7 percent year-on-year (yoy) to hit the third-highest level on record in April 2024 due to rising consumer demand for petroleum derivatives such as petrol, diesel, and aviation turbine fuel (ATF), among others. Energy demand in India is growing rapidly, with major implications for the global energy market. With a population of approximately 1.44 billion and a fast-growing economy, India has seen its energy demand increase rapidly as the country continues to urbanise and the manufacturing sector develops.

Data compiled by Petroleum Planning & Analysis Cell (PPAC), under the Ministry of Oil and Natural Gas, showed India’s crude oil import volume at 21.4 million tonnes, an increase of 7 percent yoy from 20 million tonnes in the corresponding month last year, and 3 percent from 20.8 million tonnes in the sequential previous month. India, the third largest energy consumer in the world, recorded its highest-ever crude oil import volume of 21.5 million tonnes in January this year. The highest-ever crude oil import record was set at 21.6 million tonnes in April 2022.

Rising exports from Russia
Analysts attributed India’s growing crude oil import to the country’s growing refinery stockpiles and also to meet rising immediate needs for auto fuels as well for export opportunities in the northern hemisphere during the ongoing summer travelling season. Trade sources say that India’s higher import number to more export volume being shipped out of Russia and Chinese refiners lifting of lower cargoes, which increased Russia’s share in total imports to 40 percent from roughly 30 percent in March 2024.

Energy intelligence firm Vortexa reported India’s crude oil import from Russia at more than 1.72 million barrels per day (bpd) in April, the highest amount in the last nine months. Similarly, private refiners including Reliance Industries Ltd (RIL) and Rosneft-backed Nayara Energy, imported around 770,000 bpd of crude oil from Russia in April 2024, the highest in a year. Looking at the opportunity to procure more barrels, government-owned such as Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation (HPCL) also imported 1.02 million bpd in March, which stands as the highest in seven-month.

According to Polymerupdate Research, Brent crude oil prices averaged US$90.15 a barrel in April 2024, an increase from US$85.48 a barrel in March 2024 and US$84.94 a barrel a year ago. The Indian basket crude price averaged at US$89.46 a barrel in April, up from US$84.49 a barrel in March 2024, and US$83.76 a barrel in April 2023.

Soaring import bill
India’s crude oil import bill jumped by 21 percent in April 2024, reaching US$12.3 billion compared to US$10.1 billion in the same month last year. This rise is primarily due to reduced discounts on Russian oil, despite the continued high volumes of imports. The import of liquefied natural gas (LNG) stood at US$1.1 billion, and exports at US$3.7 billion in April 2024.

According to the latest report from Icra Ltd, the discount on Russian oil declined sharply from 23 percent between April and August 2023 to 8 percent between September 2023 and February 2024. Consequently, India’s savings declined from US$5.8 billion in April-August 2023 to US$2 billion during the September 2023-February 2024 period. India saved approximately US$5.1 billion due to these discounts, and US$7.9 billion in the period between April 2023 and February 2024.

Meanwhile, India’s dependence on imported crude oil hit a record of 87.8 percent in the financial year 2023-24 and is expected to increase further during the current financial year i.e. 2024-25 (April-March) due to growing demand for petroleum products and stagnant domestic production. In April 2024, India imported 21.4 million tonnes of crude oil, a 7 percent increase from 20 million tonnes in April 2023, pushing import dependency to 88.4 percent. A sustained increase in demand is expected to raise India’s crude oil import bill to US$101-104 billion in the financial year 2024-25, a substantial increase from US$96.1 billion reported in the previous financial year.

India’s dependence on crude oil imports stood at 77 percent in the financial year 2013-14. India imported crude oil worth US$132.40 billion in 2023-24 compared to US$157.50 billion spent in 2022-23. The total volume of crude oil import stood at 232.7 million tonnes in the financial year 2022-23, which fell marginally by 0.08 percent to 232.5 million tonnes, but savings in terms of value shot up about 16 percent.

Falling discount
BPCL recently said that Russian crude oil supply has moderated in recent months due to probably falling discounts and the delay in contract renewal. The public sector oil market company confirmed that the discount on Russian crude has declined to US$3-6 a barrel now from an average of US$8-10 a barrel earlier. However, Ukrainian drone attacks on the Russian refinery have made more crude available for exports from Russia. The United States Energy Information Administration (EIA) claimed around 14 percent the Russian refining coming offline in the January-March 2024 quarter due to Ukrainian drone attacks.

Reports said that Indian refiners have been seeking a US$5 a barrel of discount for the import of crude oil and also on long-term supply contracts for ensured supply. However, Moscow crude oil producers are offering US$2 a barrel as a discount substantially lower than Russian exporters offered in the past. It is worth mentioning here that Indian public-sector oil refiners held several rounds of joint discussions earlier with suppliers in the Middle East and West Africa.

Through joint discussions, Indian refiners secured crude oil from the Middle East on more favourable terms. However, the engagement of private refiners including Reliance Industries looks challenging as Mukesh Ambani-led company stands in direct competition with the public sector Oil Marketing Companies for fuel sales. The discount talks assume significance as Russian oil producers offered as high as US$30 a barrel discount for select grades of crude oil to Indian refiners. The discount value gradually narrowed later, though.

India changed its spot crude oil purchase strategy and moved to the Middle East and Africa for cheap imports, and lowering its landed cost at Indian ports. The increased Russian oil imports reduced Indian refiners’ purchases of oil from Iraq and Saudi Arabia, decreasing the Middle Eastern oil share in India’s imports to 41 percent in April 2024 from 46 percent reported in March 2024. Higher Russian oil imports also boosted the share of oil from the Commonwealth of Independent States (CIS) countries, including Kazakhstan and Azerbaijan, in India’s imports to 41 percent in April 2024 from 37 percent in March 2024.

Rising consumption
India's total consumption of crude oil or petroleum products rose 0.8 percent to 21.6 million metric tonnes (MMT) in April 2024. PPAC data further showed the country’s consumption of petroleum products at 19.9 MMT in April 2024, up by 6.1 percent compared to the volume of 18.7 MMT during the same period of the previous year. The growth was driven by 14.1 percent growth in motor spirit (MS) or petrol, 1.3 percent in high-speed diesel (HSD) and 13.1 percent in aviation turbine fuel (ATF), 9.4 percent in liquified petroleum gas (LPG) and 3.9 percent in naptha consumption besides lubes, and petcoke during the period.

Against this consumption, the production of petroleum products of the world's third largest oil importing and consuming nation was 23.4 MMT during April 2024 which is 3.9 per cent higher than April 2023. Out of 23.4 MMT, 23.1 MMT was from refinery production and 0.3 MMT was from fractionator.

The total natural gas consumption (including internal consumption) for April was 5,515 MMSCM which was 6.4 per cent higher than the corresponding month of the previous year. The gross production of natural gas for April was 2,958 MMSCM which was higher by 7.8 per cent compared to the corresponding month last year. LNG import for April 2024 was 2,608 MMSCM which was 3.7 per cent higher than the year-ago period.

Total consumption of crude oil or petroleum products in India rose by 4.6 percent in the financial year 2023-24 to 233.3 MMT, while domestic production of crude oil rose marginally at 0.6 per cent. The domestic crude oil production was almost unchanged at 29.4 MMT in 2023-24, compared to 29.2 MMT in the year-ago period. India is dependent on imports to meet over 85 per cent of its crude oil requirements and around 50 per cent of its natural gas requirements.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com