Crude imports fall amid refinery shutdowns and West Asia tension

Supplies from Russia—India’s largest source market for crude—fell 9.2 per cent sequentially to a seven-month low of 1.73 million bpd, accounting for almost 40 per cent of India’s total oil imports in October. In addition to refinery maintenance season and oil market volatility, competition from Chinese refiners for certain grades of Russian crude played a role in the decline in oil imports from Moscow.

Oil import volumes from Iraq and Saudi Arabia were sequentially lower by 3.3 per cent at 0.84 million bpd and 10.9 per cent at 0.65 million bpd, respectively.

“October was the peak month for India’s offline (refining) capacity, leading to a full recovery in downstream operations across India in early November…this would normally incentivise India’s refiners to buy more in preparation for winter demand. However, October’s import numbers turned out to be underwhelming. Indian refiners were either distressed by the possibility of a potential Israel-Iran conflict or simply decided to stave off purchases for when pricing conditions would get better,” said Viktor Katona, head of crude analysis at Kpler.

Going by initial indications and oil tanker movements, India’s oil imports are expected to rebound in November. Vessel movements indicate that oil cargo arrivals at Indian ports in the first two weeks of November could be around 5 million bpd, significantly higher than the October volumes.

“We might see the pent-up purchasing activity hitting the market with all its weight in November… Russian imports are seen at 1.8-1.9 million bpd for most of the first half of November, while volumes from Iraq would be around 900,000 bpd in the first two weeks, so it (India’s oil imports) is likely to be really strong,” Katona said.

Despite the decline in overall import volumes of Russian oil in October, shipments of the country’s flagship crude grade—the medium-sour Urals—were at a four-month high in October. Urals is also the mainstay of India’s Russian oil purchases, and accounts for over three-fourths of Russian oil imported by Indian refiners. Imports of some other Russian crude grades, however, declined and led to the overall slide in imports.

“When it comes to Russia, Indian refiners are still piling up their purchases of Urals, importing 1.47 million bpd which is the highest since June. However, other grades that had seen some improvement over the summer months have fallen back as China ramped up deliveries via the Northern Sea Route, particularly for Arctic grades,” Katona said.

Prior to the war in Ukraine, Iraq and Saudi Arabia were the top two suppliers of crude oil to India. But as the West started weaning itself off Russian energy supplies following Moscow’s February 2022 invasion of Ukraine, Russia started offering discounts on its crude and Indian refiners started snapping up the discounted barrels.

As the world’s third-largest consumer of crude oil with a high import dependency level of over 85 per cent, India is extremely sensitive to oil prices. Although trade sources have indicated that discounts on Russian crude have shrunk over time, Indian refiners have evidently remained keen on buying Russian oil as given the high import volumes, even lower discount levels lead to significant savings.