The average cost of Russian crude including freight costs landing on Indian shores in April was $68.21 a barrel, while the cost of Saudi Arabian crude sent to India in April was $86.96 a barrel, while Iraqi oil was priced at $77.77 a barrel
Our Bureau
Mumbai/New Delhi
India’s imports of cheap Russian oil set another record in May, with the OPEC+ producer wresting more market share from Saudi Arabia. India took 1.96 million barrels a day from Russia last month, 15% more than the previous high in April, according to data from Vortexa Ltd. Shipments from Saudi Arabia slipped to the lowest level since February 2021, figures from the shipping analytics company show.
The average cost of Russian crude including freight costs landing on Indian shores in April was $68.21 a barrel, according to data from the ministry of commerce and industry. That’s the lowest level since the nation started buying major volumes from Moscow after its invasion of Ukraine earlier last year.
The average cost of Saudi Arabian crude sent to India in April was $86.96 a barrel, while Iraqi oil was priced at $77.77 a barrel. Figures for May are expected to be released next month, but prices are likely to have dropped further given global benchmark Brent fell almost 9% during the month.
“Indian refiners continue to show a voracious appetite for Russian crude given their discounts relative to Middle Eastern supplies,” according to Serena Huang, an analyst at Vortexa. Purchases of Urals and Sokol oil saw the biggest gain and overall volumes could climb this month and July, she added.
India’s import volumes of Russian crude in May were 14.6 per cent higher than in April and almost 162 per cent higher from May 2022. “India’s imports of Russian crude continue to test new highs… (Indian) Refiners have tested and gained confidence in processing Russian crude, and their voracious appetite for Russian crude is likely to grow as much as they have room to back off spot crude purchases,” said Serena Huang, head of Asia-Pacific analysis at Vortexa.
However, India now appears to be testing the limits of Russian oil imports, experts believe. Huang had earlier said that India’s import of Russian oil could peak in May due to a combination of factors, which include increased competition from Chinese refiners for Russia’s flagship Urals crude, and Indian refiners’ purchase commitments for sour grades under term contracts with their traditional suppliers in West Asia.
Urals accounted for 71.4 per cent of India’s Russian oil imports in May. India’s import of Urals — a medium-sour grade of crude — appears to have plateaued over recent months, indicating a limit on India’s capacity to import more of this grade. West Asian nations have traditionally been India’s major suppliers of sour crudes, and a considerable portion of these supplies are under annual term contracts, which have minimum purchase commitments. Most of the Russian oil, on the other hand, is being bought by Indian refiners on a spot basis. This essentially means that the extent to which Urals can replace other sour crudes is limited by Indian refiners’ minimum offtake commitments under term deals. Meanwhile, Chinese refiners have also stepped-up purchases of Urals, leading to more competition between New Delhi and Beijing.
Theoretically, Indian refiners can further step-up purchases of Russian oil by raising import of sweeter grades of crude. In fact, the share of sweeter or low-Sulphur crudes has seen an increase in India’s Russian oil imports in recent months. However, further increasing it substantially could be fraught with challenges and complexities related to payments and Western sanctions. This is because sweet crudes are generally more expensive than sour crudes, and could breach the West’s $60 price cap. Urals, on the other hand, has mostly traded below the price cap since December. While Indian refiners have been importing sweet crudes from Russia, the volumes have not been significant enough to cause any major payment or sanctions-related problems so far.
Meanwhile, Oil India has posted its highest net profit since its inception with a jump of 75.20 per cent year-on-year to Rs 6,810.40 crore for the fiscal 2022-23, on the back of higher operating income and growth in oil and gas production.
