On Wednesday, a Reuters report said that Russia had emerged as India’s top oil supplier for the second consecutive month. He replaced Iraq as India’s top supplier in November as refiners hoarded oil fearing a price ceiling could hit supplies and choke payment routes.
Data cited by Reuters from trade sources showed Indian oil imports from Russia rose for the fifth consecutive month, reaching a total of 908,000 barrels per day (bpd) in November. This was 4% higher than Russia’s oil import in October.
In fact, Russian oil accounted for about 23% of India’s overall import of about 4 million barrels a day of oil in November.
The price cap has led to an increase in flows
The European Union has imposed a ban on the import of Russian oil by sea from December 5. This has forced Moscow to look for alternative markets for its crude, mainly in Asia, for about 1 million barrels a day.
In addition, major Group of Seven (G7) economies have also implemented a $60 price cap on seaborne Russian oil in a bid to limit Moscow’s ability to finance its war in Ukraine.
Western stocks have left Russian producers in fierce competition with each other and with suppliers from Asia, Europe and the Middle East, meaning their best hope of finding buyers is to lower prices.
The EU, as its closest oil market, took about half of the country’s supplies earlier this year. However, the import ban and the price cap have blocked maritime flows of Russian crude to the bloc.
Europe’s shunned crude has been diverted to Asia, with a flotilla of tankers circling the continent and through the Suez Canal to deliver cargoes to India and China, according to a Bloomberg report.
The flow rose to more than 3 million bpd in the week to Dec. 9, accounting for 89 percent of all crude shipped from Russian ports during the week.
Shipments of crude by ship with no final destination, which usually end up in India or China, have jumped to more than 2.5 million barrels a day. While vessel volumes reporting destinations such as Indian or Chinese ports changed little from the previous week, the number of vessels reporting destinations such as Port Said or Suez rose by the equivalent of nearly 800,000 barrels per day on a rolling average of four basic weeks.
India buys below the maximum price
The ban on Russia’s flagship Urals crude made India the dominant buyer, buying barrels well below the $60 price cap imposed by the West.
For some trades this month, the price of Urals at Indian ports, including insurance and ship delivery, has dropped to about $12-$15 a barrel cheaper than a monthly average for Brent, according to a report by Reuters. dated, down from a discount of $5-$8 a barrel in October and $10-$11 in November.
The discounts mean that in some cases the oil is being sold for less than the overall cost of production, including local taxes, Reuters said, citing industry sources.
The report also said that discounts for Ural oil at Russia’s western ports for sale to India under certain deals have increased to $32-$35 a barrel when freight is not included in the price.
Benchmark Dated Brent traded below $80 a barrel in early December, while the estimated cost of Russian oil to producers, including costs of extraction, taxes and transportation to export ports, was around 15-45 dollars a barrel, said Deputy Energy Minister Pavel Sorokin. year.
Russian oil suppliers are looking to handle the transportation of Ural oil to India themselves using their own ships and shipping partners, which may reduce transportation costs, traders said.
Urals deliveries to India in November climbed to at least 3.7 million tonnes and achieved a record 53.2 percent of overall quality cargoes via seaports last month, according to data from Refinitiv Eikon.
Russia takes first place
India, the second largest oil consumer in Asia, is better placed to buy the Urals than China due to a shorter transport route and its refineries are well suited to processing Russian oil.
Additionally, New Delhi recognizes ships and insurance coverage provided by Russian entities, which are no longer recognized in Europe.
As a result, Russian oil accounted for about 23% of India’s overall import of about 4 million barrels per day of oil in November.
Last month India’s oil imports from Iraq fell to their lowest since September 2020, while those from Saudi Arabia fell to a 14-month low, data showed.
Indian refiners, initially wary of placing orders for Russian crude for cargo after Dec. 5, have resumed buying from Moscow as sanctions allow direct payment for Russian oil, sources said.
Increased purchases of Russian oil dragged down Indian imports from the Middle East and member nations of the Organization of the Petroleum Exporting Countries (OPEC) fell to a record low in November, data showed.
During April-November, the first eight months of this fiscal year, Iraq continued to be India’s top oil supplier, followed by Saudi Arabia and Russia, which dropped the UAE to fourth place.
Overall imports decrease
Despite the increased flow of Russian crude into the country, India’s overall oil imports in November were down 11% from the previous month.
India imported 3.98 million barrels per day (bpd) of oil in November as Russia-backed Nayara Energy cut purchases amid the maintenance shutdown of its 400,000 bpd Vadinar refinery on the West Coast.
Reliance Industries, operator of the world’s largest refining complex, reduced its monthly intake of Russian oil imports in November by 26.2% to about 144,000 barrels per day (bpd), according to a Reuters report.
Reliance’s overall import stood at 1.1 million barrels per day (bpd) of oil in November, down 4% from the previous month, data showed.
Like other Indian refiners, Reliance has significantly ramped up processing of discounted Russian oil after some Western companies and countries shunned purchases from Moscow following its invasion of Ukraine. The privately owned refinery significantly increased imports of Kazakhstan’s CPC blend last month.
“India will continue to seek the best deals”
India has maintained its stance that domestic refiners will continue to seek the best deals in the country’s interest.
Foreign Minister S Jaishankar told the Rajya Sabha last week that India does not buy oil from just one country, but from multiple sources.
“We are not asking our companies to buy Russian oil. We are asking our companies to buy oil (based on) what is the best option they can get. Now it depends on what throws the market,” he said in response to clarification sought by MPs on the his statement his motion on foreign policy.
Companies will look to more competitive sources, Jaishankar added.
“Please understand that we don’t just buy oil from one country. We buy oil from multiple sources, but it’s a sensible policy to go where we get the best deal in the interest of the Indian people and that’s exactly what we’re trying to do,” he said.
On price caps, Jaishankar said the impact of the move was not yet very clear for India.
“Our concern is really what it would do to the stability and accessibility of energy markets, that’s a concern,” he said.
(With contributions from agencies)