India’s imports of crude oil from Russia surged a whopping 80% in September after a marginal drop seen during the summer months.
According to data from energy cargo tracker Vortexa, the share of Urals in India’s crude oil imports rose to 1.56 million barrels per day in September, compared with 865,000 barrels a day during the same period last year. On a monthly basis, imports were up by 8% from 1.44 million bpd.
“Indian refiners have been tacitly lamenting about Urals trading at -$4 per barrel to Brent on a delivered basis, however given the robust pull on Russian crude from China, the differentials on Russian barrels will not be coming down anytime soon. Urals at that price is still $6 a barrel lower than anything term-supplied from the Middle East,” said Viktor Katona, lead crude analysts at Kpler.
Similarly, the share of India’s crude imports from Iraq increased significantly in September due to better pricing than the Saudi Arabian crude, according to analysts.
In September, the country imported 926,000 bpd crude from Iraq, up 14.6% on year and 8.54% from August, according to data from Vortexa. Kpler analysis showed a similar trend with imports from Iraq touching 916,000 bpd the previous month, compared with 805,000 bpd last year.
Currently, Russia is the biggest supplier of crude to India followed by Iraq and Saudi Arabia. Even though Saudi Arabia still remains one of the top three suppliers of crude, its share of imports have significantly reduced over the years.
In September, Saudi Arabia exported about 506,000 bpd of crude oil to India, drastically lower than 855,000 bpd in August, according to data from Vortexa. Imports from Saudi Arabia are down by almost 45% from 918,000 bpd in September 2022.
The lower share of imports from Saudi Arabia, which once used to be one of the major exporter of crude to the country, can be attributed to increased costs of Saudi Arabian crude after the country announced extension of its production cut till December.
“Iraq has been pricing its cargoes below Saudi Arabian prices, like of Basrah Medium is still $1.8 per barrel cheaper than the similar-quality Arab Medium,” said Katona. “That is why Indian refiners have been cutting down on Saudi barrels – on the one hand they understand the political importance of maintaining good relationships with Saudi Aramco, however the suboptimal pricing prompts them to buy the bare minimum,” Katona said.
Data from Kpler showed that Saudi Arabia exported 556,000 bpd crude oil to India in September, down from 828,000 bpd in August. On a yearly basis, imports were down by almost 37%.
Analysts also believe that India will continue to import crude at its current level in the upcoming winter season given Russia’s ban on diesel and gasoline exports continue.
“I think India will stick to its September levels of buying further on, importing 1.8-1.9 million barrel a day,” Katona told the Financial Express. “Should Russia’s domestic standoff between the Energy Ministry and oil companies continue (and the country’s ban on diesel and gasoline exports remain in place), then Russian oil producers would be forced to curb refinery runs and re-orient their oil to the export markets. If that happens, India will be buying even more, so for Indian buyers the question is how much more could they buy, not how much less.”
However, in value terms, India’s total oil imports in August were $13.20 bln, down 23.7% on year, according to data from the commerce ministry.
“India continues to fulfil its growing crude requirements from across global markets at most optimal price it gets,” said Gaurav Moda, Partner, Energy Sector Leader from EY India. “As volume availability vs price flexibility changes from one source, appropriate rebalancing may happen, though some of this tends to reflect relative bargaining power of the crude sources – in the meantime India will continue to push in its best interests,” he added.
Meanwhile, concerns remain whether Saudi Arabia and Russia will extend their output cuts beyond December which can further inject a spiraling effect in crude oil prices.
Brent crude had earlier touched $97 a barrel on Thursday, at the highest level since November 2022. Analysts also believe that if the supply is not resumed, crude prices can further rise in the first half of 2024.
“If the crude oil supply is not resumed by Russia and Saudi Arabia, crude prices can go up in the first half of 2024. WTI can reach a level of $110-$115/bbl and Brent can go up to $120/bbl,” said Manoj Jain, director, Prithvi Finmart.
Saudi Arabia and Russia had earlier extended their oil supply cuts till December by 1 million barrel per day and 300,000 bpd respectively.