India’s Russian oil imports rebound in March as lower prices boost non-sanctioned tanker availability
The key reason for the ample availability of Russian oil for exports is the slump in Moscow’s domestic oil demand
India’s Russian oil imports have averaged a robust 1.75 million bpd so far in the January-March quarter, only slightly lower than the quarterly peaks of the past two years After the steep decline following the latest US sanctions on Russia’s oil trade, India’s Russian oil imports have recovered sharply in March, thanks to the plentiful availability of Moscow’s oil and it largely trading below the Western price cap of $60 per barrel. This has ensured enough availability of non-sanctioned tankers to haul Russian crude to India.
The key reason for the ample availability of Russian oil for exports is the slump in Moscow’s domestic oil demand following a fresh wave of Ukrainian drone strikes on various Russian refineries.
India’s Russian oil imports have averaged 1.85 million barrels per day (bpd) in the first 21 days of March, sharply higher from February’s 1.47 million bpd and January’s 1.64 million bpd, per provisional data from commodity market analytics firm Kpler. Russian oil’s share in India’s oil import basket so far in March stands at a little over 35 per cent, up from around 31 per cent in February.
India’s Russian oil imports have averaged a robust 1.75 million bpd so far in the January-March quarter, only slightly lower than the quarterly peaks of the past two years. India and China have been the top destinations for Russian crude following Russia’s February 2022 invasion of Ukraine, which led to Western buyers shunning Moscow’s oil.
Just before demitting office in January, the US’s Joe Biden administration announced sweeping sanctions against Russia’s oil trade. It sanctioned as many as 183 tankers—a sizable part of the so-called shadow fleet that had kept Russian oil flowing—apart from sanctioning two Russian oil majors and Russian insurance companies, among others involved in the Russian oil sector and trade.
The sanctions initially made it difficult for Indian refiners to secure enough cargoes of Moscow’s crude as they were unwilling to deal with sanctioned vessels and insurers. But with the price of Russian oil slipping below $60 per barrel, tanker and insurance availability is not a concern as the price cap mechanism enforced by G7 countries and their allies allows Western shippers and insurers to participate in Russian oil trade if the price of oil does not breach the price cap.
According to Kpler’s database, all Russian cargoes that have arrived in or are signaling to land in India this month are being transported by non-sanctioned tankers.
“This surge in volumes in March comes as Russia’s domestic crude demand plummeted in February and March due to Ukrainian drone attacks on several refineries…The rising availability of Russian crude exports has driven down Urals (Russia’s flagship oil grade) prices, with average prices assessed at $59.9 per barrel in February and $56 per barrel so far in March. This suggests that Urals crude remains below the G7 price cap, enabling buyers and sellers to utilise Western shipping and insurance services for transportation,” said Sumit Ritolia, Lead Research Analyst, Refining & Modeling at Kpler.
Ritolia added that despite the expanded sanctions, India’s Russian oil imports show no signs of “a structural retreat” and Indian refiners so far have remained “deeply committed” to buying discounted Russian crude despite the tightening of restrictions on Russia’s oil sector. According to him, moderation in imports of Russian oil seen in January and February likely reflected transitional logistical adjustments rather than demand weakness.
Russia’s flagship Urals crude, also the mainstay of New Delhi’s oil imports from Moscow, continues to trade at a discount to rival grades from India’s traditional suppliers in West Asia. Although discounts have shrunk considerably over time, they remain lucrative for Indian refiners as India depends on imports to meet over 85 per cent of its crude oil needs.
“Indian refiners are well-configured for medium sour crudes like Urals, which can be blended or processed directly. The economics of running discounted barrels outweigh the operational overhead introduced by sanctions…Indian buyers have adjusted quickly to sanctions by engaging with non-sanctioned intermediaries, leveraging, and using alternative payment systems. These logistics may be more complex, but they remain effective,” Ritolia said.
Industry insiders expect Indian refiners and Russian oil suppliers and traders to continue adjusting to the latest sanctions and devise ways to buy Russian oil without any sanctions risk in the near to medium term. Indian refiners have publicly stated that they are ready and willing to buy Russian oil if the transactions, suppliers, traders, shippers, and insurers involved are not under sanctions.
Russia is expected to remain India’s largest source of crude in the medium term unless there are more sudden disruptions or abrupt shifts in trade flows. A lot will depend on the stance the new Donald Trump administration in Washington takes on Ukraine war-related sanctions on Russia, the discounts available on Russian oil, and how competitively other major suppliers price their crude.
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