Russian crude oil supply remains steady despite sanctions pressure

In first nine days of Sep, loadings for India stood at 1.55 million bpd, as against August loadings of 1.49 million bpd

India’s crude oil supplies from Russia stayed robust in early September, underlining refiners’ leaning towards discounted oil from Moscow despite sanctions pressure from the West.

 

In the first nine days of September, Russian crude oil loadings for India stood at 1.55 million barrels per day (bpd), as against August loadings of 1.49 million bpd, showed data from Kpler, a global shipping data and analytics provider.

 

Indian oil refiners, including state-run Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL), have confirmed to continue purchasing crude oil from Moscow, citing an absence of direct sanctions on Russian oil. Major private refiners importing Russian crude oil are Reliance Industries Limited (RIL), and Nayara Energy.

 

“Russia remains India’s largest crude oil supplier, providing over one-third of total imports. This reflects continuity in India’s strategy of maximising discounted Russian barrels despite evolving sanctions pressure,” said Sumit Ritolia, lead research analyst, refining & modelling, Kpler.

 

Early September arrivals correspond to oil agreements struck by Indian refiners in July. The impact of the recent sanctions would be more pronounced from late September or October.

 

India’s oil trade with Russia continues despite US President Donald Trump’s recent penalty on New Delhi and a slew of European Union (EU) sanctions directed towards curbing finances of Moscow. Effective August 27, Trump imposed an additional duty of 25 per cent on India, doubling tariffs to 50 per cent, in an attempt to target New Delhi for purchasing Russian crude oil.

 

On July 18, the EU lowered price cap on Russian oil from $60 per barrel (bbl) to $47.6/bbl while imposing direct sanctions on Rosneft-backed Nayara refinery in Gujarat.

 

Despite the sanctions, Indian refiners continue to rely on Russian crude oil on account of discounts to the extent of $3-5/bbl, thereby improving their margins. Discounts on Russian crude oil have currently tanked to below $5/bbl, which were as high as $14-15/bbl in 2023.

 

“Russian barrels remain the cheapest option in India’s basket (a Russian barrel is around $3-5/bbl cheaper than other sources on a landed cost basis), and without a formal directive from New Delhi, refiners are unlikely to leave even a $0.1/bbl discount unutilised,” Ritolia added.

 

Diversification remains key import strategy

 

Though Russia remains top source, India’s crude oil supply from traditional suppliers like Saudi Arabia and Iraq also remain strong.

 

Saudi Arabia’s crude oil exports to India stood at 993,000 bpd till September 9, show Kpler data, as compared to August loadings of 574,000 bpd. Meanwhile, Iraq’s September (till 9th) loadings for India came in at 760,000 bpd, compared to August crude oil exports of 935,000 bbl.

 

“The Middle-eastern strength indicates that it remains India's traditional supplier. India continues to balance between discounted Russian grades and reliable Middle-eastern supplies to ensure security and avoid overexposure to geopolitical shocks,” said Ritolia.

 

Meanwhile, United Arab Emirates’ (UAE’s) loadings for India till September 9 stood at 679,000 bpd while the US’ figures came in at 111,000 bpd.

 

In September, India’s crude oil imports have historically been higher on account of increased domestic demand amid festive season, and robust exports to the European region. Refinery operations are expected to remain strong, with lower maintenance runs in the month, said Ritolia.