India’s import of cheap Russian oil reached a new high in May, surpassing the total quantity purchased from Saudi Arabia, Iraq, the UAE, and the US, industry data showed.
According to energy cargo tracker Vortexa statistics, India took 1.96 million barrels per day from Russia in May, 15% more than the previous high in April. Russia currently accounts for 42% of all crude oil imported by India.
Overview
According to a PTI report, the increase in Russia’s share is accompanied by a corresponding decline in the percentage of oil shipments from other Middle Eastern nations to India. The report stated, “Shipments from Saudi Arabia slipped to 560,000 tonnes — the lowest since February 2021,” and “Oil producers cartel OPEC’s share in India’s oil imports fell to an all-time low of 39 per cent in May.”
Up to 90% of the crude oil that India imported at one point came from the Organisation of the Petroleum Exporting Countries (OPEC), primarily in the Middle East and Africa. However, this percentage has declined since Russian oil became more affordable following Moscow’s invasion of Ukraine in February last year.
Most Russian crude imports reportedly go to private refiners, such as Mukesh Ambani’s Reliance Industries, and Russian state-run oil giant Rosneft-backed Nayara Energy. In April, these refineries accounted for over 46% of Indian crude imports from Russia.
India's import of cheap Russian oil scales another record in May, taking 1.96 million barrels a day.https://t.co/OUMGtVqRTZ
— BQ Prime (@bqprime) June 4, 2023
Discounted Russian oil has helped India comply with the rising demand for petroleum products, with 222.30 million tonnes consumed in FY23, which is 10.2% more than the previous year. However, the benefits of low oil prices have yet to be passed on to consumers, as pump prices have remained consistent since April 2022.
Russian imports have surpassed those from the US, UAE, Saudi Arabia, Iraq, and other major Indian suppliers over the past ten years. In May, Iraq provided 0.83 million barrels per day (bpd), while the UAE sent 203,000 bpd. Whereas, the US supplied up to 138,000 bpd.
Russia’s market share in India’s imports increased to 1.96 million barrels per day in May, seizing 42% of the market as compared to less than 1% before the beginning of the Russia-Ukraine war in February 2022. Russia purchased more than twice the 0.83 million bpd of oil from Iraq, India’s leading oil supplier since 2017-18. Saudi Arabia has fallen to third place.
India, China Receive Discounted Russian Crude Oil
Indian refiners previously avoided purchasing Russian oil due to high freight costs. However, now that some Western nations have banned Russian imports due to Moscow’s invasion of Ukraine, these entities are snapping up a lot of Russian cargo at a discount compared to other grades.
In April, the average cost of Russian oil, including freight charges, landing on Indian shores was USD 68.21 per barrel, the lowest level since the Ukraine conflict. In April, the average price of Saudi crude shipped to India was USD 86.96 per barrel, while Iraqi oil was priced at USD 77.77 per barrel.
China, India receive record Russian crude oil in Mayhttps://t.co/gL7GCinMEx pic.twitter.com/KqUXGVICZj
— Dunya News (@DunyaNews) June 1, 2023
Russia is supplying record volumes of crude oil to India to compensate for the gap left by the EU’s December ban on imports. In December, the EU banned Russian seaborne oil and set a USD 60-per-barrel price restriction, preventing other countries from using EU shipping and insurance services unless oil is sold below the cap.
Industry sources reveal that Indian refiners use the UAE dirham to pay for oil imported at less than USD 60.
According to Vortexa, Russian supplies arrived in India at a record high of 8.6 million tonnes (62.8 million barrels), while China got 6 million tonnes, steady from April. Based on Kpler data, India’s imports reached a record of 66.7 million barrels, while China’s increased to 49.2 million barrels.
Refiners in China are striving to reduce feedstock prices and enhance refining profits amid a slower-than-expected economic recovery. To this end, large private oil refiners began purchasing Russian crude earlier this year and have recently boosted their purchases.
According to a trader involved in the marketing of Russian oil, “Chinese buyers’ increased demand for Russian oil loading in April and beyond was supported by higher profitability of supplies amid softer freight and firmer differentials.”
Russian oil averaged $89 per barrel until January this fiscal year, while the Indian crude basket averaged $96 per barrel. Russia has emerged as one of India’s leading crude suppliers. Despite this, petrol and diesel pump prices in the country have remained unchanged for over ten months.