NEW DELHI: With more countries looking to buy crude oil from Russia, India may lose the bargaining power that it had earlier and this may lead to plateauing of imports from Russia. Sector analysts feel there is a limit to the volume of medium-sour crude Indian refiners can process, as the oil companies have to fulfil their term contracts with their traditional suppliers from West Asia.
India, the third-largest importer of crude, has enhanced its import significantly after the Russian and Ukraine war. Russian crude, which used to constitute less than 2% till 2021-22 in India’s crude basket, now constitutes its highest.
As per energy intelligence firm Vortexa, India’s crude basket constitutes 34.5% from Russia, and the country imported 16,31,000 barrel per day (bpd) in April 2023. “India’s imports of Russian crude in the past months have seen a slowdown in month-on-month growth, and volumes could peak soon. There is a limit to the volume of medium-sour crude Indian refiners can process and they do have to fulfil their term contracts with their Middle East suppliers,” said Serena Huang, head of APAC analysis at Vortexa.
According to her, India is also facing strong competition from China for Russian Urals, which could cap the upside on India’s imports of Russian crude. Huang is of the view that higher demand for Russian crude should reduce the negotiating power for Indian refiners, allowing Russia to reduce the discounts on its crude. As per the reports, India currently gets discounts of up to $15-20 a barrel, now has fallen below $10 per barrel.
Meanwhile, India imported 1,678 kbpd (thousand barrels per day) Russian crude in April. Among them private oil companies such as Reliance imported 747 kbpd, and government PSUs like HPCL, BPCL, and IOCL imported 931 kbpd from Russia. Among its traditional suppliers from the Middle East, India imported 812 bpd crure from Iraq, 671 bpd from Saudi, 185 kbpd from the UAE and 119 kbpd from the US.
Crude trades below $75 a barrel, first time since March
Crude price in the international market fell below $75 a barrel on Wednesday for the first time since March 2023. Brent Crude was trading at $87 a barrel as recently as mid-April. This comes after several members of the OPEC+ producers group decided to cut output by over 1 million barrels a day. But a softening US economy and continued fragility among its banks, as well as weak manufacturing data in China, have turned investors much more bearish and caused refining margins to slump. ENS