Tracking the economic indicators: Oil imports from Russia make a new record

Indian imports of discounted crude oil from the Russian Federation hit an all-time high in April, even as the US progressively tightened the screws on exports of Russian crude, according to data analytics firms.

India imported about 59 million barrels of crude oil from Russia in April this year, against 58 million barrels in March and 12 million barrels a year ago, according to the data from  commodity market intelligence firm Kpler. Purchases averaged around 2 million barrels a day, predominantly of Russian Urals — a medium, sour grade similar to Gulf crude.

Russia accounted for 42 per cent of India’s overall crude imports, followed by Iraq at 18 per cent and Saudi Arabia at 15 per cent, according to calculations based on Kpler’s ship-tracking data. Since February, Russian supplies have exceeded the combined sum of Saudi and Iraqi shipments.

US supplies were one the biggest casualties of Russian inroads into India’s crude oil market. It was just 3 per cent in April at 4 million barrels, against a 12 per cent share in February 2022, when Russia invaded Ukraine.

That also explains Washington’s resistance to Russian oil purchases. Russian oil is supplied at a discount of $8-$13 per barrel to Brent on delivered terms to India. That makes Russian grades cheaper than both US and other Middle East crude. Given New Delhi’s directive to state oil companies to keep pump prices of diesel and petrol flat, discounted Russian oil helps reduce losses at IOC, BPCL, and HPCL, an industry official said.

India’s oil imports from Russia have only increased with every new phase of sanctions, reflecting the central government’s view that it is best to capitalise on growing tensions between the US and Russia, rather than take sides in the conflict.

Reliance Industries was the biggest buyer of Russian grades in April, accounting for a 26 per cent share, followed closely by IOC at 24 per cent, and BPCL at 20 per cent. The share of India’s state-run refiners together was 63 per cent in April, a record in volume terms, compared to 59 per cent in February.

Indian refiners have been emboldened by New Delhi’s stance of supporting them in their efforts to buy discounted oil, industry officials said. In fact, India’s purchases intensified after a price cap on Russian crude was announced in December. There have been logistical and payment issues, with banks demanding details of Russian oil trades as a condition to releasing payments. In cases where grades like ESPO and Sokol exceeded the price cap, Indian refiners have opted to pay in dirhams.

Urals accounted for 62 per cent of India’s purchases. It’s India’s most preferred crude for two reasons, a state-oil refiner said. First, it typically trades below a G-7 grouping-mandated price cap, which exempts purchasers from Western sanctions. Second, it is similar to Arab medium grades, making it easier to process at state refineries, which were designed for Gulf crude.

The US-led G7 grouping imposed a $60 per barrel cap on exports of Russian oil. Western insurers and transporters will not be able to provide financial and logistics services for trades above the price cap.

But the US and the EU have intensified policing, and the latest Opec+ output cuts have sent Brent grades higher. This poses two problems for India. If Urals trades consistently over the price cap, there will be serious payment issues for Russian oil. The UAE has also told New Delhi that payments in dirhams into Russian accounts in Dubai may not be possible in all cases, after Washington leaned on the Emirates.

China sourced 42 million barrels of crude last April, or, 1.4 million barrels a day of seaborne crude from Russia, Kpler’s data shows. But China buys more of the light, sweet ESPO varieties, which are sold over the west-mandated price cap, compared to cheaper Urals oil.

However, China’s overall imports of Russian crude exceeded India's by around 16 per cent in March, according to the Chinese customs data, because a substantial volume of Chinese purchases of Russian oil is also shipped via pipelines.