Russia contributed over 35% of India’s crude imports in 2023: S&P Global
No diversions of Russian crude for India seen despite Red Sea attacks
India minister says no currency-related issues for Russian crude imports
Russia emerged as the biggest crude supplier to India in 2023, accounting for more than one-third of its imports, a trend that is likely to remain intact in early 2024 despite the recent Red Sea attacks escalating fears over diversions and higher shipping costs, analysts and trade sources told S&P Global Commodity Insights.
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They added that a slowdown in Russian flows in recent months — attributed to factors such as payment hurdles, logistical and shipping delays — may do little to dent the overall trend, as Indian refiners had got used to many grades of the feedstock from the largest non-OPEC supplier.
According to S&P Global data, Russia contributed over 35% of India’s total crude imports in 2023, amounting to 1.7 million b/d. In December, Indian imports of Russian crude oil averaged 1.43 million b/d, reflecting a decrease of 150,000 b/d compared with November and a significant drop of 620,000 b/d from the peak in May, which marked India’s highest monthly imports from Russia.
Trade sources and analysts said that although a series of attacks on shipping in the Red Sea had compelled traders and suppliers to explore alternative routes via the Cape of Good Hope, crude shipments from Russia to India have remain unaffected so far.
“India’s demand for Russian crude remains resilient despite Red Sea threats, with no known diversions seen so far. However, there is expectation that the US and Latin American crude volumes may opt for the Cape of Good Hope shipping route,” said Sumit Ritolia, refinery economics analyst at S&P Global.
Red Sea still the preferred route
According to S&P Global Commodities at Sea data, the Red Sea route remains the preferred option for traders supplying Russian crude to Indian refiners. Currently, there have been no observed alterations in the route plans for Russian oil destined for India.
Russia has approximately 112 million barrels of oil on water, with a minimum of 43.7 million barrels destined for India. Notably, 19.2 million barrels are positioned in proximity to the Indian subcontinent, covering the Arabian Sea, Indian Ocean East, and Southeast Asia. In the case of any disruptions, refiners or traders have the option to utilize these volumes to sustain refinery operations, according to S&P Global.
“With the situation in shipping from Red Sea not improving and adding to the risks, oil prices could go higher. India was benefiting from the discounted Russian oil but in the current circumstances, while there are no current diversions, future contracts could be in jeopardy and India might look for alternative supplies from Middle East,” said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis.
Hardeep Singh Puri, India’s petroleum minister, recently told reporters that the Red Sea attacks had created a highly turbulent situation, and the government was monitoring the developments closely. The attacks could potentially disrupt crude supplies, but India was confident of navigating through the turbulence.
Indian refineries, accustomed to acquiring Sokol at a rate of 150,000-160,000 b/d, observed a notable absence of Sokol imports in December 2023. Some ships had to wait for discharge for more than 10 to 15 days.
The recent slowdown can be attributed to a rise in the Middle Eastern flows, weather-related issues at Russian ports, heightened refinery maintenance, and increased scrutiny on ships carrying Russian oil. Despite the current dip, it is anticipated that inflows will likely bounce back in the coming months. This resurgence is expected, as crude runs are projected to increase post-maintenance, especially with refining margins remaining robust and a need to meet seasonal demand growth, analysts said.
“The challenges associated with Sokol crude imports were connected to both Western sanctions and payment-related issues in the past month. It is important to note that the payment issue appears to be temporary and is not anticipated to impact future cargoes from Russia,” Ritolia said.
Indian government officials have strongly denied that there was any issue concerning the payment mechanism. Instead, the drop in imports was due to relatively unattractive prices and smaller margins, they added.
“There is no payment problem. India’s leadership has only one requirement and that is to ensure that the Indian consumer gets energy at the most economical price, without disruption,” Puri said, adding that oil refining companies had not complained about any payment-related issues while importing crude from Russia.
“Crude imports are a pure function of the price at which our refineries buy,” he said, adding that some new oil producers were willing to offer higher discounts than Russia as India has established credentials as a regular oil buyer. But he did not elaborate.
Russia’s invasion of Ukraine and Western sanctions imposed in response to the conflict have led to Russia’s key crude grade Urals trading at a significant discount to Dated Brent. In April 2022, the grade was trading at discounts as high as $40/b, as its key customers in Europe shunned Russian barrels, according to Platts assessments by S&P Global Commodity Insights.
Russian production cuts and redirection of significant volumes to the Asian market has seen this discount narrow. This discount hit a post-invasion low of $12.15/b in early November before growing again in recent weeks amid tougher enforcement of the price cap on Russian oil. Platts last assessed the discount at $17.5/b to Dated Brent on Jan. 5.
A recent Indian parliamentary panel report quoted a representative of the petroleum ministry as saying that all purchases of Russian crude were under the ambit of Western sanctions on Moscow for its war in Ukraine.