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India’s crude oil imports from Russia surged to a fresh all-time high in May as the world’s third-largest oil consumer imported close to 2 million barrels per day (bpd) of the commodity from Russia, consolidating Moscow’s newfound position as New Delhi’s largest source of oil, data shared by energy cargo tracker Vortexa showed. India’s total refining capacity stands at around 5 million bpd and the country depends on imports to meet over 85 per cent of its oil requirement.
At 1.96 million bpd, Russian crude accounted for almost 42 per cent of India’s total oil imports during the month, beating the cumulative import volumes from at least the next five major suppliers, which include traditional heavyweights like Iraq and Saudi Arabia, as per the Vortexa data. Import volumes from Iraq stood at 839,000 bpd, accounting for 18 per cent of India’s oil imports in May. At 560,000 bpd, imports from Saudi Arabia made up 12 per cent of New Delhi’s crude oil imports. Supplies from the United Arab Emirates (UAE) in May were at 203,000 bpd, or 4 per cent of India’s overall oil imports. India’s import volumes of Russian crude in May were 14.6 per cent higher than in April and almost 162 per cent higher from May 2022.
“India’s imports of Russian crude continue to test new highs… (Indian) Refiners have tested and gained confidence in processing Russian crude, and their voracious appetite for Russian crude is likely to grow as much as they have room to back off spot crude purchases,” said Serena Huang, head of Asia-Pacific analysis at Vortexa.
However, India now appears to be testing the limits of Russian oil imports, experts believe. Huang had earlier said that India’s import of Russian oil could peak in May due to a combination of factors, which include increased competition from Chinese refiners for Russia’s flagship Urals crude, and Indian refiners’ purchase commitments for sour grades under term contracts with their traditional suppliers in West Asia.
Urals accounted for 71.4 per cent of India’s Russian oil imports in May. India’s import of Urals — a medium-sour grade of crude — appears to have plateaued over recent months, indicating a limit on India’s capacity to import more of this grade. West Asian nations have traditionally been India’s major suppliers of sour crudes, and a considerable portion of these supplies are under annual term contracts, which have minimum purchase commitments. Most of the Russian oil, on the other hand, is being bought by Indian refiners on a spot basis. This essentially means that the extent to which Urals can replace other sour crudes is limited by Indian refiners’ minimum offtake commitments under term deals. Meanwhile, Chinese refiners have also stepped up purchases of Urals, leading to more competition between New Delhi and Beijing.
Theoretically, Indian refiners can further step up purchases of Russian oil by raising import of sweeter grades of crude. In fact, the share of sweeter or low-sulphur crudes has seen an increase in India’s Russian oil imports in recent months. However, further increasing it substantially could be fraught with challenges and complexities related to payments and Western sanctions. This is because sweet crudes are generally more expensive than sour crudes, and could breach the West’s $60 price cap. Urals, on the other hand, has mostly traded below the price cap since December. While Indian refiners have been importing sweet crudes from Russia, the volumes have not been significant enough to cause any major payment or sanctions-related problems so far.
The European Union banned import of Russian seaborne crude in December, and along with its major Western allies, imposed a price cap of $60 per barrel for other buyers of Russian oil. Although India is neither a signatory to the price cap nor has it accepted it, it would still be hit if there are widespread breaches in its purchases of Russian oil. This is because the price cap prohibits Western shippers and insurers from getting involved in trade of Russian oil if it trades above $60 per barrel.
Indian refiners started snapping up Russian oil soon after the war in Ukraine broke out in February last year, as Moscow began offering discounts. From less than 1 per cent before the war in Ukraine, the share of Russian crude in India’s oil import basket has shot up to over 40 per cent now. The continuing surge in India’s oil imports from Russia have catapulted Moscow into the club of India’s top-five trade partners.
