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March 2, 2024

Stable Trends: India’s Oil Imports from Russia Hold Steady in February

In February, India’s oil imports from Russia remained stable, hovering around 1.5-1.6 million barrels per day (bpd), suggesting a limited scope for volume growth in the near future, as indicated by a blend of factors affecting the oil trade dynamics between the two countries.

Despite a slight uptick of 1.4% in February compared to January, reaching 1.55 million bpd, Russian crude imports have maintained an average of approximately 1.6 million bpd from August to February. These figures represent a significant decline from the peak witnessed in May-July, when imports exceeded 2 million bpd. However, Russian oil still accounted for a notable 32.5% of India’s oil imports in February.

The decline in Russian oil imports from the earlier peak months has led Indian refiners to bolster supplies from traditional oil suppliers in West Asia. Notably, February saw a surge in imports from Saudi Arabia, rising by 27% to almost 900,000 bpd, marking the highest volume since March of the previous year.

Challenges in the form of payment-related issues between Indian Oil Corporation (IOC) and Russia’s Rosneft have particularly impacted Sokol crude volumes, with no deliveries to India in December and January. Although Sokol crude deliveries in February totaled around 100,000 bpd, none were acquired by IOC, the primary buyer previously. Instead, Hindustan Petroleum Corporation (HPCL) and Nayara Energy (NEL) purchased the majority of Sokol cargoes.

The rise in Sokol imports by Chinese refiners further suggests that previous import levels to India may not rebound soon without a significant resolution between IOC and Rosneft. Additionally, narrowing price differentials between Russian crude and oil from other major suppliers, alongside the risk of US sanctions on tankers hauling Russian oil, pose challenges for Indian refiners, potentially limiting the scope for increased imports from Russia.

While Russia’s discounted crude prices previously propelled it to become India’s largest oil supplier, recent geopolitical tensions and competition for Russian barrels from China have led to a narrowing of discounts. This trend, coupled with tanker availability concerns due to potential US sanctions, presents obstacles for Indian refiners seeking to ramp up Russian oil imports.

However, there remains a possibility of increased Russian oil imports if Indian public sector refiners secure term contracts with Rosneft. Currently, IOC holds the sole term contract, with other refiners relying on spot purchases. Speculation suggests that additional public sector refiners are considering similar term contracts, which could potentially boost supply volumes in the future.

Rajan Shukla

Rajan Shukla

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