Russian crude oil imports to India touched a new high of 1.96 million barrels per day, highest since July last year when the imports stood at 2.06 million barrels per day, according to the latest ship tracking data from Kpler. Imports rose as Russian refiners had more crude to export due to lower refinery runs after the Ukrainian drone strikes.

Russia exported 1.96 million barrels of crude oil per day to India last month, up 3% from the previous month, the data showed. However, it is still lower than the 2.15 million barrels per day the country imported in the same period last year.

Post the Russian invasion of Ukraine, this is the 23rd consecutive month when Russia has been the largest supplier of crude to India, Kpler’s lead crude analyst Viktor Katona noted. This is despite the narrowing discounts by the country on the crude oil it supplies.

“As India’s imports of Russian barrels usually edge higher into the spring months as there’s more crude available (Russian refinery runs have been counterseasonal low because of the Ukrainian drone strikes, so there was more crude going into the wider markets for exports), May marked the fifth consecutive month-on-month increase in imports,” Katona said.

Moreover, Saudi Arabia’s market share in India’s crude imports reduced to 11% last month compared to 13% in April primarily on the back of rising official selling price (OSPs) of Saudi crude grades. Iraq’s crude market share, on the other hand, has inched up slightly to 20% in May from 18% in April.

“Rising OSPs of Saudi crude grades are definitely impacting Asian refiners’ interest for the crude, in light of the current weakness in refining margins. It is too early to conclude that Iraq has taken over Saudi’s market share, as the crude exporters could consider adjusting their crude prices to remain competitive despite interests to maximize crude revenues,” said Serena Huang, analyst at Vortexa.

Cumulatively, the country imported 4.79 million barrels per day of crude oil in May, marginally up from 4.69 million barrels per day imported in May 2023.

Among Indian refiners, Indian Oil Corp bought the largest volumes of Russian crude oil at 447,986 barrels per day, followed by Reliance Industries which imported 385,786 barrels per day of Russian oil.

IOC is the only refiner to previously have a long-term supply with Russia but the contract has expired in March end and has not been renewed yet. Now, according to reports, Reliance Industries has signed a one-year deal with Russia’s Rosneft to buy at least 3 million barrels of oil a month in roubles. Roseneft’s deal with RIL may limit cargoes for supply to IOC if the deal is renewed at all, analysts note.

“IOC has failed to re-sign its term deal with Rosneft, however Reliance has stepped in and signed a long-term deal with the same Russian NOC, Rosneft. The deal is to supply Aframax cargoes of Urals, 2-3 per month with the option of going even higher in case there’s availability, at a price of -3 USD/barrel to Dubai,” Katona said. “So from now on, Reliance has the term commitments locked in. There’s still market rumors that IOC would seek to have a new term deal, so they’re not giving up, but Rosneft’s readiness to commit its cargoes would be limited by their newly signed Reliance pact.”

Going forward, even as the discounts offered by Russia on its crude supplies remain lucrative compared to the Middle Eastern grades of crude oil, India’s imports of Russian oil may see a decline due to its unavailability.

“India’s imports of Russian crude are definitely going to edge lower into the summer months. The main reason is not even Indian demand amidst the monsoon season – if the price is right, then Indian refiners would continue buying in large quantities – rather the availability of Russian crude,” said Katona.

He highlighted that Russia’s refinery runs have started off the year at a convenient level of 5.6-5.7 million barrels per day but have dropped to 5.2-5.3 million barrels per day after the first wave of drone attacks in late January. The earlier level of refinery runs have failed to recover all the way until May.

“We see Russian refinery runs moving up to 5.7 mbd in July-August, taking place just as Russia’s OPEC+ voluntary production cuts start to materialize. Then, come September, Indian refiners will start their usual autumn refinery maintenance programme, the biggest of the year, meaning imports would be constrained by how much India can actually refine,” Katona said.

Financial Express