India's Russian Oil Import Hits 12-Month Low But Long-Term Appetite Remains Intact

India's crude oil imports from Russia fell for a second straight month in January to its lowest in 12 months but the nation's insatiable appetite for Russian crude remains for the long term, according to data from energy cargo tracker and industry officials.

Russia supplied 1.2 million barrels per day of crude oil to India in January, down from 1.32 million barrels in December and 1.62 million barrels in November 2023, according to data from energy cargo tracker Vortexa.

Russia however continues to remain India's top oil supplier, accounting for a little less than a quarter of 4.91 million barrels a day of oil that the world's third largest energy consumer imported in January.

The decline in cargoes from Russia was made up by increased sourcing from Iraq, which supplied 1.1 million barrels per day (bpd) in January, up from 985,000 bpd in the previous month.

Supplies from Saudi Arabia declined to 659,000 bpd from 668,000 bpd in December. India is more than 85 per cent dependent on imports for its needs of crude oil, which is converted into fuels such as petrol and diesel at refineries.

Its appetite for Russian oil swelled ever since such oil started trading on discount as the West shunned it to punish Moscow for its invasion of Ukraine.

According to Vortexa, an energy intelligence firm, India imported just 36,255 bpd of crude oil from Russia in December 2021 as compared to 1.05 million bpd from Iraq and 952,625 bpd from Saudi Arabia.

There were no imports from Russia in the following two months but they resumed in March, soon after the Ukraine war broke out in late February.

Imports from Russia soared to an all-time high of 2.1 million bpd in June last year, accounting for almost 40 per cent of all oil India imported.

According to Serena Huang, Vortexa's head of APAC analysis, the reason for the fall in Russian crude oil import in last couple of months was the narrowing of Russian crude discounts versus Middle Eastern crude, recent US sanctions on shipowners carrying Russian crude above the price cap and rising tanker premiums as a result of the Red Sea attacks.

Also, some state refiners rushed to fulfill term commitments with Middle Eastern suppliers, industry officials said adding the removal of sanctions on Venezuela has whetted the appetite of private Indian refiners to resume purchases from the South American supplier.

Indian refiners started snapping up crude shipments from Venezuela after a three-year suspension in September 2020. These developments together have contributed to a slowdown in Russian purchases.

Industry officials said the long-term demand for Russian crude oil remains intact. "A dip in one month and rise in another doesn't tell you the entire story. The fact remains that Indian companies will continue to buy Russian crude oil as long as they make economic sense," an official said.

Indian state firms buy Russian crude oil on a delivered basis, meaning the supplier has to make arrangements for shipping and the buyer pays only when oil is delivered at the receiving port. This is unlike sourcing from the Middle East where the buyer pays for shipping and insurance.

"Till such time that the delivered cost of Russian crude oil is less attractive as compared to alternate sources, Indian refiners will buy," another official said.

Trade sources and analysts also said that refiners are currently expressing increasing concerns about rising shipping costs and insurance.

The US in December imposed sanctions on ships and vessel operators carrying Russian oil sold above the USD 60 a barrel cap set by the Group of Seven nations.

Several tankers had to divert as banks and service providers were asked to ensure cargoes do not breach the price limit. Hindustan Petroleum Corporation Ltd (HPCL) chairman Pushp Kumar Joshi at an investor call last month said Russian oil made up for 30 per cent of all oil that the company imported and that the company has tied up supplies from Russia and other sources till mid-April.

Bharat Petroleum Corporation Ltd (BPCL) chairman G Krishnakumar at an earning call late last month stated that 40 per cent of all crude oil that the firm imported in December quarter came from Russia.