Despite diminishing discounts, Russian crude oil flows to India may continue
Despite discounts on Russian crude – which have fallen to the lowest level since the start of the war in Ukraine – and increasing sanctions, import volumes from the country will remain stable for the time being or at least until July, refinery officials said.
“There is demand for Russian crude and deliveries are not expected to slow beyond this point unless something major happens. Talks are ongoing and purchases will continue,” said an official from a major refinery.
The sentiment was echoed by another official, who pointed out that almost all major refineries plan to receive Russian crude in the coming months.
Officials added that while sanctions remain on Russia’s shipping fleets, India is seeing increasing shipments by tankers linked to G7 countries.
More than 1.1 million barrels per day (bpd) or 33 percent of Russia’s total seaborne crude oil exports were lifted last month by tankers flagged, owned or operated by companies based in the G7, the EU, Australia, Switzerland or Norway, or were insured by Western protection and indemnity clubs, according to data from S&P Global Commodities at Sea and Maritime Intelligence Risk.
This compared with 30.1 percent, or 1 million barrels per day, in January, and shows that G7-linked tankers returned to Russia even as stricter due diligence procedures came into effect from February, data show.
Russia remained the largest supplier of crude oil for the 17th month in a row as of February, according to estimates from London-based commodity data analytics provider Vortexa.
Russia’s share of India’s crude oil imports rose to 32 percent in February from 25 percent in January and 31 percent in December. These figures still remain well below the historic high of 44 percent recorded in May last year.
Obstacles remain
Import volumes have fallen in recent months due to possible problems in settling payments with Russian suppliers. Imports of Russian crude oil of Sokol quality were the hardest hit.
However, after months of falling imports due to US sanctions, crude returned to India in February, refinery officials said. The slightly sweet crude produced by the Sakhalin-1 project in Russia’s Far East had increasingly found a market in India by 2023.
Crude oil could face even more hurdles, however, with the US imposing new sanctions on Russia’s largest tanker group, Sovcomflot, in February.
The sanctions were announced on the second anniversary of Russia’s invasion of Ukraine, after fourteen tankers – part of the fleet – “violated” the G7 price limit of $60 per barrel for Russian oil, Washington DC had said.
But Petroleum Ministry officials said any drop in crude inflows is a function of oil prices.
Russian shipments to India rose to 1.41 million barrels per day in February, up from 1.2 million barrels per day in January, according to Vortexa.
Imports amounted to 1.32 million barrels per day in December and 1.48 million barrels in November.
The lower number of discounts has also played a role in declining imports. In recent months, discounts have fluctuated between $3 and $4 per barrel.
Reflecting the changing trade, India had increased purchases from Iraq in January and from Saudi Arabia in February.
“Imports from Middle Eastern suppliers are expected to continue to trend upward in the coming months,” said another official.
First print: March 15, 2024 | 12:43 pm IST