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Oil imports from Russia stable in Feb, little room seen for volume growth | Business News


India’s crude oil imports from Russia have stabilised at around 1.5-1.6 million barrels per day (bpd) over the past few months and the level could define the immediate to near-term limit on Indian refiners’ capacity to purchase oil from Moscow, as per an analysis of shipping data and views from industry insiders.

A combination of reasons — including a drop in Sokol crude purchases by Indian refiners, narrowing discounts on Russian crude, increasing cost of freight and risk premiums amid the Red Sea crisis, and a rising number of tankers being sanctioned by the United States for G7 price cap violations — indicate low possibility of growth in India’s Russian oil imports over the next few months.

In February, India imported a total of 1.55 million bpd of Russian crude, up 1.4 per cent from January volumes, as per preliminary data from commodity market analytics firm Kpler. Russian oil imports, which had risen to over 2 million bpd in May-July, have averaged at around 1.6 million bpd in August-February. From a peak of over 45 per cent share in India’s oil imports in May, Russian oil accounted for 32.5 per cent of India’s oil imports in February. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement.

With India’s Russian oil imports falling from the highs of May-July, Indian refiners have been turning to their traditional oil suppliers in West Asia to ramp up supplies from that region. While January saw a spurt in supplies from Iraq and the United Arab Emirates (UAE), February saw higher import volumes from Saudi Arabia. Oil imports from Saudi Arabia in February jumped 27 per cent over January to almost 900,000 bpd—the highest since March of last year.

Even as supply of Urals—Russia’s flagship crude oil grade and the mainstay of India’s Russian oil imports—has remained stable over the past few months at 1.1-1.2 million bpd, Sokol crude volumes have been hit largely due to payment-related issues between Indian Oil Corporation (IOC) and Russia’s national oil company Rosneft.

There were no Sokol deliveries to India in December and January, against an average of 140,000 bpd in January-November 2023. In February, Sokol crude deliveries to India stood at around 100,000 bpd, but none were taken by IOC, the main buyer hitherto. Of the three Sokol cargoes that reached Indian ports in February, two were bought by Hindustan Petroleum Corporation (HPCL) and one by Nayara Energy (NEL).

Chinese refiners are now ramping up Sokol imports, which could mean that deliveries to India may not recover to previous levels anytime soon, unless there is a major breakthrough in the form of a contract between IOC and Rosneft. “Sokol might become a Chinese-dominated grade (going forward)…70 per cent of all Sokol cargoes in 2023 were purchased by IOC,” said Vikotor Katona, Kpler’s lead crude analyst.

Apart from the fall in Sokol volumes, the price differential between Russian crude and oil from other major suppliers has also narrowed over the past few months amid competition for Russian barrels from China. And if the US continues to sanction more tankers hauling Russian oil due to alleged breach of the G7 price cap of $60 per barrel, tanker availability could become a concern over the coming months, further driving up landed price of Russian crude for Indian refiners. This, in turn, leaves little room for a ramp-up in oil import volumes from Russia, according to industry executives.





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