Despite shrinking discounts, Russian crude flow to India may continue

Despite discounts on Russian crude oil — which fell to the lowest since the Ukraine war began — and the rising sanctions, import volumes from the country will remain stable for now or at least till July, said refinery officials.

“There is an appetite for Russian crude, and shipments are not expected to taper off beyond this point unless something major happens.

"Talks are on, and buying will continue,” an official at a major refinery said.

The sentiment was echoed by another official, who pointed out that almost all major refineries have plans to receive Russian crude over the next few months.

Officials added that while Russian shipping fleets remain under sanctions, India is increasingly seeing shipments by tankers aligned with G7 nations.

Over 1.1 million barrels per day (bpd) or 33 per cent of the total seaborne Russian crude exports last month were lifted by tankers flagged, owned or operated by companies based in the G7, the EU, Australia, Switzerland or Norway, or 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 per cent, or 1 million bpd in January, and shows that G7-linked tankers were coming back to Russia even as tougher due diligence procedures took effect from February, data shows.

Russia remained the single-largest supplier of crude oil for the 17th straight month as of February, estimates made by London-based commodity data analytics provider Vortexa show.

Russia's share of India's crude oil imports rose to 32 per cent in February from 25 per cent in January and 31 per cent in December.

These figures still remain much lower than the historic high of 44 per cent registered in May last year.

Hurdles remain

Import volumes have dipped in recent months owing to possible problems in settling payments with Russian suppliers.

The import of Russian Sokol grade crude was most impacted as a result.

However, after months of falling imports as a result of US sanctions, the crude grade has again started landing in India in February, refinery officials said.

Produced by the Sakhalin-1 project in Russia's Far East, the light sweet grade of crude had increasingly found a market in India in 2023.

However, the crude may face further hurdles as the US imposed fresh sanctions on Russia's leading tanker group, Sovcomflot, in February.

Announced on the second anniversary of Russia's invasion of Ukraine, the sanctions were placed after 14 tankers — part of the fleet — were in ‘violation’ of the G7's $60 a barrel price cap on Russian oil, Washington DC had said.

But Petroleum Ministry officials said any dip in incoming crude volumes is a function of oil prices.

Russian shipments to India rose to 1.41 million bpd in February compared to 1.2 million bpd in January, according to Vortexa.

Imports had stood at 1.32 million bpd in December, and 1.48 million in November.

Lower incidence of discounts has also played a part in falling imports.

Discounts have ranged between $3 and 4 per barrel in recent months.

As a result of the changing trade, India had gone for increased sourcing from Iraq in January and Saudi Arabia in February.

“Imports from Middle East suppliers are expected to remain on an upward trajectory for the next few months,” another official said.