Russia may be India’s biggest crude supplier in June, a historic first | Business Standard News

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Russian oil is on pace to account for 21 per cent of all imports into India, shrinking the shares of Iraqi and US crude

Russia replaces Saudi Arabia as China's biggest crude oil supplier

India is turning away from its favourite crude—Iraqi Basrah, a staple for state-run refiners led by IOC. Displacing Iraq is Russia, which may become India’s biggest crude supplier in June for the first time, pushing Iraq to the second position. Deeply discounted Russian Urals have also shrunk the share of US crude, once among India’s top four oil suppliers.

Russian oil is on pace to account for 21 per cent of all imports into India at 985,000 barrels a day in June, up from 738,000 barrels a day in May. Indian seaborne arrivals from Iraq are set to finish June lower at just 969,000 barrels a day, a 21 per cent market share and lower than the 2021 average of 24.5 per cent, according to Reid L’Anson, a Houston-based commodity economist for data intelligence firm Kpler.

“In general, Russian grades are indeed taking market share from Middle Eastern producers,” L’Anson said. “India has long sought to decrease its reliance on Middle East OPEC producers and it’s saving a lot of cash buying discounted Russian grades.”

Loadings for India from Iraq have declined 20 per cent in June from May, said Emma Li, an analyst from Vortexa. Indian and Chinese refiners have turned to Russian Urals crude, similar to Basrah crude, but offered at substantial discounts. That forced Iraq to raise the official selling prices for July-loading barrels of Basrah Medium and Basrah Heavy by only 50 cents a barrel each, compared to a price jump around $2-3 in other Middle Eastern crude grades, Li added.

India’s official numbers are telling. The Russian Urals now pose a significant threat to Iraqi Basrah, which accounted for a third of total Indian crude imports in March and 27 per cent in February. That proportion has whittled down to a quarter in April and 24 per cent in May, still substantial but on a declining trend. Indian customs data tends to differ slightly from analyst estimates, which are calculated based on shipping data.

The US is the biggest loser from India’s turn to Russian crudes, explaining why it is vociferously protesting against buying the Urals. Russian crudes are mainly displacing India’s spot purchases, affecting US supplies the most, an official from a state refiner said. In the last few years, the US became one of India’s top crude suppliers from virtually zero after former president Donald Trump pushed India to buy US oil.

According to customs data, the US supplied 14 per cent of India’s crude in February and March, peaking in calendar 2022 at over 700,000 barrels a day. That has shrunk by nearly half to 381,000 barrels a day in April and 195,000 barrels daily in May. June may come even lower.

According to customs data, Russian oil supplies to India rose by over tenfold to 655,000 barrels a day in May from January and were three times higher than US shipments. The data showed that Russian oil accounted for 14 per cent of India’s crude imports in May compared to just 4 per cent for US oil.

“It seems that imports from Russia to India have stayed at the May level in June, without a further expansion,” said Lauri Myllyvirta, lead analyst, Centre for Research on Energy and Clean Air. He pegs India’s purchases of Russian crude, averaging a little less than Euros 200 million daily in June.

Even if Russian production continues to decline (another 1 million barrels a day will likely be offline by the end of the year), this will be offset by a decline in purchases out of Europe, leaving volumes available for India, L’Anson said.

Iraq’s share in India’s crude basket may not dip sharply as the US because the oil is supplied under term contracts. Also, Indian state-operated refineries derive the maximum value from Basrah, with facilities designed for such grades, an official from a state-run refiner said. Middle East producers are also seen as much more reliable than Russia.

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