From Jan lows Russian oil rebounds to 45.4% of Indian crude imports in June

Russian volumes have surged amid shrinking discounts for the grades. Discounts averaged $10 per barrel on a delivered basis off Brent crude in mid-2023 compared to over $4 per barrel now

New Delhi and Moscow have apparently found a way around Western sanctions, which started escalating since last October on Russian ships and insurance companies, to boost the share of Russian crude oil in India's crude import basket to a near record in June by around 14 percentage points from a January low. Higher purchases from Russia have come at the cost of crude sourced from West Asia, according to industry sources and shipping data.

Russian oil constituted 45.4 per cent of India's overall 4.63 million barrels per day of crude purchases in June compared to 40.7 per cent in May and 31.7 per cent in January when Washington unleashed a new wave of sanctions, disrupting Indo-Russian oil trade. Russia had a record 45.8 per cent share of the Indian oil imports market in May 2023.

That compares to the share of West Asian oil, led by Iraq and Saudi Arabia, in India's crude basket at just 36 per cent last month compared to 39 per cent in May and nearly 50 per cent in January when Russia's share was low. Iraqi and Saudi supplies dropped in June by more than a fifth on the month to around 800,000 barrels per day and 430,000 barrels per day, respectively, with Saudi shipments dropping to the lowest in a decade, initial data show.

"It is largely Russian oil that has reduced the share of West Asia crude," said R Ramachandran, an oil industry consultant and former refining director at Bharat Petroleum. Discounts offered by Russia make the crude competitive, he added.

While Russian oil has become cheaper thanks to the discount, prices of West Asian grades have been rising. Saudi Arabia increased prices of crudes supplied to Asia for the third month in a row in June, said Vandana Hari, a Singapore-based energy expert, and founder of Vanda Insights.

A surge in Russian volumes has happened amid shrinking discounts for the grades. Discounts averaged $10 per barrel on a delivered basis off Brent crude in mid-2023 compared to over $4 per barrel now, according to two refining officials.

Russian barrels to India averaged $83.30 per barrel in April on a delivered basis, data for which is last available, according to Indian customs data. Saudi shipments averaged around $91 per barrel in April on a delivered basis, reflecting an $8 per barrel gulf between the oil sourced from both nations.

Industry officials said that the premiums of Iraq's benchmark export grade Basrah surged last month, with Europe making demands on Iraqi oil and outpricing India. Supplies of sour crude, which are slightly higher sulphur grades, are set to remain tight after key Opec-plus countries extended their 2.2 million barrels per day of production cuts until October, driving demand for Basrah cargoes in Europe, where levels were assessed at strong premiums to the official formula price, US market intelligence publication Energy Intelligence said.

Russian crude supplies to India climbed to around 2.1 million barrels per day in June compared to around 1.99 million barrels per day in May, according to ship tracking data. India last imported over 2 million barrels per day in July 2023, with the share of Russian oil in India's total imports at 44 per cent. Imports of US crude climbed by 75 per cent in June from May as Indian refiners substituted Nigerian and Russian light, sweet oil, or low sulphur grades, with US oil.

Washington has been applying pressure on Russian supplies by first targeting shipping companies like Sun Ship Management and Sovcomflot, key shippers of Russian oil to India. Last month, the UK sanctioned Russian insurer Ingosstrakh, a significant provider of insurance for over 100 vessels in the 800-strong shadow fleet that supplies Russian oil to India and China. New Delhi has extended approval until March 2029 to Ingosstrakh to insure Russian supplies shipped to India. Industry officials said that India would react only if Washington stepped up sanctions against the insurer.

"Russia always finds a way out to supply us," said an Indian crude trader at a Mumbai-based refiner. Another trader added that Russian companies switch quickly to non-sanctioned ships and insurers to keep the oil flowing.

India also continued to consolidate its position as the world's biggest importer of seaborne crude from Russia for the second consecutive month in May, exceeding Chinese purchases by almost 850,000 barrels per day compared to around 600,000 barrels per day in May, according to ship tracking data.