India has steadily shifted its crude oil imports away from its usual suppliers in the Middle East and the United States, intensifying procurement from Russia due to massive discount offers and local currency trade facilities. India’s crude oil imports from Russia have consistently reached new highs month after month, with the potential to increase further due to low pricing.
In May, India’s crude oil imports from Russia reached a new milestone of 1.96 million barrels per day (bpd) in May, representing a 15 percent increase from the previous peak of 1.68 million bpd in April. As a result, Russian energy accounted for 42 percent of India’s overall crude oil demand in May, compared to 36 percent in April, according to reports citing energy cargo tracker Vortexa. Russian oil now holds the highest share among individual countries in India’s crude oil basket.
Interestingly, India’s imports of Russian oil now exceed the combine oil imported from Saudi Arabia, Iraq, the United Arab Emirates, and the United States. The surge in Russian oil supply has come at the expense of the traditional suppliers, with Saudi Arabia’s crude oil exports to India plunging to 560,000 bpd, the lowest since February 2021. Consequently, India’s crude oil imports from the Organisation of the Petroleum Exporting Countries (OPEC) fell to an all-time low of 39 percent in May.
| Russia’s pre-war contribution in energy supplies |
| Particulars | Russian share (%) |
| Estonia | 100 |
| Finland | 100 |
| Latvia | 100 |
| Lithuania | 100 |
| Slovakia | 100 |
| Bulgaria | 97 |
| Hungary | 83 |
| Slovenia | 72 |
| Greece | 66 |
| Czech Republic | 63 |
| Austria | 62 |
| Poland | 57 |
| Germany | 46 |
| Italy | 34 |
| France | 18 |
Source: Reports
At one point, OPEC countries, primarily from the Middle East and Africa, accounted for nearly 90 percent of India’s crude oil imports. However, this share steadily declined due to 30-35 percent discount offered by Russian producers. The Western nations’ sanctions, a price cap and an embargo following Russia’s invasion of Ukraine in February 2022 have promoted the Kremlin to sell crude oil at discounted rate to its partners, with India and China emerging as the largest buyers.
Russia has now been the largest crude oil supplier to India for the eighth consecutive months. Crude oil is processed to produce petrol and diesel at refineries. Further data reveals that Iraq supplied 0.83 million bpd of oil in May, while the United Arab Emirates and the United States shipped 203,000 bpd and 138,000 bpd to India in May, respectively.
Out of the 4.7 million bpd of crude oil imported by India in May, the entire OPEC cartel shipped a combined total of 1.8 million bpd. OPEC’s crude oil export volume to India reported a decline in May, down from 2.1 million bpd in April. In contrast, Russia’s share was only 1 percent in India’s crude oil import basket before the start of the Ukraine war but has since increased exports to empty storage wells before new arrivals take place.
High freight cost dents India’s import from Russia earlierIndian refiners were hesitant to import crude oil from Russia due to the high landed cost at Indian ports. Previously, freight costs contributed significantly to the overall landed cost. However, today Russian cargoes are available at a massive discount, as some Western nations have rejected them in protest of Russia’s invasion of Ukraine.
India’s import from Russia now exceed 0.83 million bpd of crude oil imported from Iraq, which had been India’s largest supplier since 2017-18. Saudi Arabia has now slipped to the No. 3 position. Reports indicate that the average cost of Russian crude oil, including freight costs to Indian coasts, is now US$68.21 per barrel, the lowest since the war started in Ukraine. In comparison, the average cost of crude oil imported from Saudi Arabia was estimated at US$86.96 per barrel, while oil from Iraq was priced at US$77.77 per barrel.
Russia is now selling a large quantity of crude oil to India to compensate for the decline in exports to European Union (EU) nations, some of relied on Russian-origin-energy for up to 100 percent of their demand. It is worth mentioning that the European Union, along with some western nations, imposed sanctions, a price cap of US$60 a barrel, and joined the United States-led embargo on Russian oil to restrict its import. According to reports, India imported a mere 68,600 bpd of crude oil from Russia in March 2022.
Russia extends 0.5 million bpd production cutAmid disagreements among members regarding the final conclusion, Russia extended the previously announced 0.5 million bpd production cut until December 2024. Russia, the third largest producer of crude oil, has been facing multiple challenges from Western nations, who have accused Russia of initiating an energy war with Europe, a region highly dependent on Russian energy, with some countries relying on it up to 100 percent. Since Russia’s invasion of Ukraine in February 2022, several European countries have halted the purchase of Russian energy. Moreover, Western nations have imposed an embargo and set a price cap of US$60 a barrel on Russian crude oil earlier this year.
With an 11 percent market share, Russia reported crude oil production of 10.94 million barrels in 2022. The production cuts will serve as a precautionary measure, coordinated with the countries participating in the OPEC+ agreement, which had previously announced voluntary cuts in April this year.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
