Kamal Ghorui
In a quick and immediate fix to the Middle East oil supply shock, Indian refiners have begun purchasing readily available Russian crude oil. With ships and tankers currently not moving through the Strait of Hormuz in the Persian Gulf for fear of attacks, the supply of Middle East oil has come to a halt. Around 40-50% of India’s crude oil imports come through the Strait of Hormuz. Now, with the purchase of Russian crude the immediate risk of a supply shortage may be mitigated. According to a Bloomberg, Indian refiners have moved swiftly to secure supplies of Russian crude, with several million barrels currently positioned in Asian waters providing an immediate option to offset disruptions in Middle Eastern oil flows after the United States eased restrictions on such trade. Earlier today, US Treasury secretary Scott Bessentt announced a 30-day waiver on US conditions for India to stop buying Russian crude.While India has never officially said it will stop Russian crude oil purchases, and a substantial portion still continues to flow in, the amount has dropped.
Indian Refiners Turn To Russian Crude
People familiar with the transactions told Bloomberg that more than 10 million barrels of Russian crude have already been purchased since the start of the Middle East crisis last weekend. A significant portion of these deals may have been concluded even before the Donald Trump administration announced the one month waiver.Also Read | Israel-Iran war: What US 30-day waiver on Russian oil means for India – explainedShipping data compiled by Bloomberg shows that roughly 15 million barrels of Russian oil are currently held on tankers in the Arabian Sea and the Bay of Bengal. In addition, vessels carrying about 7 million barrels are anchored near Singapore. These cargoes could reach Indian ports in less than a week. Further shipments are also moving eastward through the Mediterranean Sea and the Suez Canal toward the Indian subcontinent.India emerged as a major buyer of discounted Russian crude after Moscow’s invasion of Ukraine, but purchases were sharply reduced earlier this year following pressure from the US.
However, since supply disruptions stemming from the conflict in the Middle East have restricted India’s access to alternative barrels from producers in the Persian Gulf, it has prompted the United States to grant a temporary relaxation.According to sources quoted in the report, state-run refiners Mangalore Refinery and Petrochemicals Ltd. and Hindustan Petroleum Corp Ltd., which had not bought Russian crude since December, have now re-entered the market. Reliance Industries Ltd., India’s largest private-sector refiner, is looking to procure Russian crude for the refinery that produces fuels for domestic consumption, according to a person familiar with the development. The source added that the company’s export-oriented refinery will continue processing crude sourced from countries other than Russia.Even before the license was announced, several tankers carrying Russian crude had already started altering their declared destinations toward Indian ports. Data from Kpler indicates that at least 18 vessels loaded with the Urals grade are now showing India as their intended destination.
“Refiners could quickly ramp up purchases again, potentially pushing volumes back above 2 million barrels a day in the near term,” said Sumit Ritolia, an analyst at the data intelligence firm. “The steep discounts previously seen on Russian crude could narrow significantly and may even shift toward premiums.”Market activity suggests that this shift is already underway. According to people familiar with the transactions, Indian refiners are currently paying a premium of $2 to $4 per barrel above Dated Brent for deliveries of Russia’s benchmark Urals crude. This is a reversal from last month, when the same grade was trading at a discount of $15 to $20 per barrel compared with Brent as buyers in India had scaled back purchases.With Indian refiners returning to the market, imports of Russian crude could once again approach the peak level of more than 2 million barrels per day recorded in mid-2024. Kpler data shows that shipments had dropped to an average of 1.06 million barrels per day last month, the lowest level since September 2022.
