NEW DELHI: India’s crude oil imports hit a record high of around 5.6 million barrels per day (bpd) in October, with refiners stepping up purchases from both the Middle East and Russia. While improved supplies through the Strait of Hormuz have boosted Gulf shipments, rising freight costs could make Russian crude less attractive in the coming months, according to energy intelligence firm Kpler.Middle Eastern supplies accounted for about 2.3 million bpd, while Russian shipments remained strong at nearly 2 million bpd, Kpler lead analyst Nikhil Dubey said, as quoted by PTI.The increase in Gulf supplies comes as more crude is moving through the Strait of Hormuz, a key route for global oil trade. Higher ship-to-ship transfers helped boost flows through the strait during September and October.Gulf producers are also offering competitive delivered prices to regain market share in India. This could make their supplies more attractive to refiners in the coming months, particularly as the cost of transporting Russian crude rises.Dubey said Russian shipments could moderate in November and December as attacks in the Black Sea push up freight rates, reducing the price advantage of Russian oil once transportation costs are included.“Russian flows, which have held strong at these levels, could soften in November-December as attacks in the Black Sea push freight rates higher, making Russian barrels less attractive on a landed cost basis,” he said.However, a shift towards Middle Eastern supplies may depend on how the situation around Hormuz unfolds. Any renewed disruption to shipments through the strait could make Gulf crude harder to secure and prompt Indian refiners to return to Russian barrels, even at higher freight costs.“The situation remains volatile, and any renewed disruption to Hormuz flows could see refiners turning back to Russian barrels, even at higher freight costs,” Dubey said.The October 16 waiver under the Graham Act could also ease concerns among some Indian buyers about the risks associated with purchasing Russian oil, giving them greater flexibility in sourcing supplies, he added.India imports nearly 90 per cent of its crude oil requirements, making the availability, transportation costs and final landed price of different grades important factors in procurement decisions.
How Russia became a key supplier
India’s dependence on Russian crude rose sharply after Moscow invaded Ukraine in February 2022. Western sanctions, the European Union’s ban on seaborne Russian crude and a G7 price cap disrupted Russia’s traditional oil trade, forcing it to look for alternative buyers.With European refiners turning away from Russian supplies, Moscow offered steep discounts to attract customers. Indian refiners emerged as major buyers, with Russian crude eventually accounting for as much as 40-50 per cent of India’s oil basket at its peak.The price advantage was significant. Russian Urals crude traded at discounts of around $30 per barrel to Brent at times in late 2022 and early 2023, making it an attractive option for Indian refiners seeking to lower input costs.Those discounts have since narrowed. Yet Russian shipments have remained substantial, partly because disruptions to Middle Eastern supplies have made alternative sources important for India’s energy security.
