India’s crude oil imports from Russia have surged to an unprecedented 2.73 million barrels per day in June, propelled by attractive discounts and disruptions in traditional West Asian supply chains, significantly impacting the nation’s energy security and import bill.
Photograph: Toby Melville/Reuters
Key Points
- India’s crude oil imports from Russia reached a record 2.73 mbpd in June, accounting for nearly 50 per cent of total imports.
- The surge is attributed to discounts of $2-5 per barrel offered by Russia, a significant shift from premiums paid earlier in the conflict.
- China’s reduced crude oil purchases, drawing from its inventories, have prompted Russia to re-offer discounts to India.
- Elevated energy prices led to an 81.5 per cent year-on-year increase in India’s crude oil import bill in May, despite stable import volumes.
- The increase in Russian oil purchases helped stabilise India’s monthly crude oil imports to pre-conflict levels of over 5 mbpd.
As the West Asia crisis choked crude oil supplies from India’s traditional suppliers, the country’s refiners ramped up imports from Russia to a record high at around 2.73 million barrels per day (mbpd) in June on the back of discounts of $2-5 a barrel.
Until June 20, Russia contributed nearly 50 per cent of India’s total crude oil imports in the month, showed the data from maritime intelligence firm Kpler.
Shifting Global Oil Dynamics
The recent discounts on Russian oil barrels compare to a premium of $13-15 per barrel paid by Indian refiners from March to May, during the beginning of the conflict, as countries raced to secure supplies.
With China, the world’s largest crude oil importer, significantly reducing purchases as it draws oil from its inventories, Russia is again offering crude oil at discount to India, said sources.
As energy prices spiked, China strategically withdrew from seaborne markets, with its imports falling by more than 6 mbpd between March and May.
“As China curtailed oil purchases, Russia has again started offering crude oil at discount to India.
“However, the discount is quite low as compared to pre-conflict levels,” said a refinery executive, on condition of anonymity.
Impact on India’s Import Bill
Prior to the West Asia crisis, Indian refiners were receiving discounts as high as $10 per barrel on purchase of Russian oil.
Even the low discounts on Russian oil come as a major relief to India amid the ongoing crisis.
Elevated energy prices have resulted in an 81.5 per cent year-on-year (Y-o-Y) increase in the country’s crude oil import bill in May to $18.7 billion, even though oil import volumes remained largely the same as last year, showed government data.
The US sanctions waiver, which allows countries to buy crude oil and petroleum products from Moscow that are stranded at sea, also aided India in ramping up purchases.
The waiver expired on June 17.
Geopolitical Factors and Supply Diversification
Before the Iran war began, India had scaled back imports of crude oil from Russia due to sanctions slapped by the US and the European Union (EU).
Meanwhile, the US on Monday issued a 60-day general licence waiving sanctions on Iranian oil, which authorises the production, delivery and sale of Iranian crude, petroleum and petrochemical products through August 21.
The move is part of an agreement aimed at ending the war between the countries.
The sharp increase in Russian oil purchases also helped stabilise India’s monthly crude oil imports to pre-conflict levels of over 5 mbpd, which had dropped to 4.4-4.5 mbpd in March and April due to supply constraints.
India is the world’s third-largest crude oil importer. Apart from Russia, India also purchased a significant amount of crude oil from the United Arab Emirates (UAE) and Saudi Arabia at 572,000 bpd and 358,000 bpd, respectively, in June so far.
Non-traditional crude oil suppliers such as Venezuela and Brazil supplied 291,000 bpd and 105,000 bpd, respectively, in June.
