India's Russian crude imports fall to 12-month low, future trends unclear

5 Feb 2024 , 01:49 AM

India’s imports of Russian crude oil decreased in January for the second consecutive month, reaching a 12-month low, but the country’s long-term demand for Russian crude will not go away, according to information from energy cargo tracker and industry officials. According to data from energy cargo tracker Vortexa, Russia supplied India with 1.2 million barrels of crude oil per day in January 2023, compared to 1.32 million barrels in December and 1.62 million barrels in November 2023.

Still, Russia is India’s biggest supplier of oil, providing just less than 25% of the country’s daily 4.91 million barrels of oil, which is used by the third-largest energy consumer in the world in January.

The increase in sourcing from Iraq, which provided 1.1 million barrels per day (bpd) in January, up from 985,000 bpd the previous month, offset the decrease in cargoes from Russia.

Saudi Arabia’s supply dropped from 668,000 barrels per day in December to 659,000 barrels per day. India depends over 85% on imports to meet its demands for crude oil, which refineries use to make fuels like petrol and diesel.

Since Russian oil began to trade at a discount and the West rejected it as retaliation for Moscow’s invasion of Ukraine, its hunger for the oil has grown.

In December 2021, India imported just 36,255 barrels of crude oil from Russia, compared to 1.05 million barrels from Iraq and 952,625 barrels from Saudi Arabia, according to energy intelligence firm Vortexa.

The next two months saw no imports from Russia, but in March—shortly after the conflict in Ukraine started in late February—they started up again.

In June of last year, imports from Russia reached a record high of 2.1 million bpd, making up nearly 40% of all the oil that India imported.

September 2020 marked the beginning of the three-year suspension of oil imports from Venezuela, as Indian refiners seized the opportunity. The combination of these events has caused a slowdown in Russian buying.

According to industry officials, there is still a long-term market for Russian crude oil. ‘A decline in one month and an increase in another does not provide the whole picture. As long as it makes financial sense, Indian businesses will undoubtedly keep purchasing Russian crude oil, an official stated.

Russian crude oil is purchased by Indian state-owned companies on a delivered basis, which means that the supplier arranges for shipping and the buyer pays only after the oil is delivered to the receiving port. 

The US placed penalties in December on ships and vessel operators that supplied Russian oil for more than the USD 60 per barrel maximum established by the Group of Seven countries.

Banks and service providers were urged to make sure that shipments do not exceed the price cap, therefore several tankers were forced to divert. During an investor call held last month, Pushp Kumar Joshi, the chairman of Hindustan Petroleum Corporation Ltd (HPCL), stated that 30% of the oil purchased by the company came from Russia and that supply from other sources would be limited until mid-April.

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