How Ukraine war is changing India’s oil purchase

How Ukraine war is changing India’s oil purchase

India is one of the major oil importers in the world and buys 85 per cent of its oil needs. Even though Russia caters to 2 per cent of its total oil needs, the disruption to this trade route has been a major blow to oil imports.

NEW DELHI: The ongoing war between Russia and Ukraine has compelled Indian oil refiners — both central and private — to significantly raise their intake of Russian oil.

India is one of the major oil importers in the world and buys 85 per cent of its oil needs. Even though Russia caters to 2 per cent of its total oil needs, the disruption to this trade route has been a major blow to oil imports.
However, western sanctions against Russia for its invasion of Ukraine worked towards India’s benefit.
The sanctions prompted many oil importers globally to shun trade with Moscow, thereby pushing spot prices for Russian crude to record discounts against other grades.
This provided domestic refiners — which rarely used to buy Russian oil due to high freight costs — an opportunity to snap up low-priced crude. India has bought Russian crude oil at discount as high as $30 per barrel.

Data compiled by Reuters showed Russian grades accounted for about 16.5 per cent of India’s overall oil imports in May, and helped raise the share of oil from the C.I.S. countries to about 20.5 per cent, while that from the Middle East declined to about 59.5 per cent.
The share of African oil in India’s crude imports last month surged to 11.5 per cent from 5.9 per cent in April, the data showed.
Russia becomes India’s second biggest oil exporter
India’s import of Russian oil surged to a record high, with Moscow replacing Saudi Arabia as second biggest oil supplier to India.
In May, domestic refiners received about 819,000 barrels per day (bpd) Russian oil, the highest thus far in any month, compared to about 277,00 in April.
Russian-origin crude hit 5 per cent of India’s total seaborne imports in April for the first time, rising from under 1 per cent throughout 2021 and Q1 2022, the data showed.
India, the world’s third-biggest oil-importing and consuming nation, has long defended purchases of crude oil from Russia following President Vladimir Putin ordering the invasion of Ukraine.
The oil ministry had last month stated that “energy purchases from Russia remain minuscule in comparison to India’s total consumption.”
Iraq remained the top supplier to India in May and Saudi Arabia is now the third biggest supplier.

Up until April, Russian oil accounted for less than 5 per cent of the crude processed at the Jamnagar oil refinery run by Reliance Industries. In May, it accounted for more than a quarter, according to Centre for Research on Energy and Clean Air quoted by AP.

India’s exports of oil products like diesel have risen to 685,000 barrels per day from 580,000 barrels per day before the invasion of Ukraine. Much of its diesel exports are sold in Asia, but about 20 per cent was shipped via the Suez Canal, headed for the Mediterranean or Atlantic, essentially Europe or the US, said Lauri Myllyvirta, a lead analyst at CREA told AP.

India continued to buy cheap Russian oil despite criticism
India has defended its purchase of “cheap” Russian oil saying imports from Moscow made only a fraction of the country’s overall needs and a sudden stop would drive up costs for its consumers.
Higher oil imports from Russia, curbed OPEC’s share in India’s overall imports to 65 per cent in April.
India’s oil imports in May were about 5.6 per cent up from the previous month and about 19 per cent from a year earlier, as per Reuters data.
Although India’s purchases of Russian crude aren’t illegal or in breach of any sanctions, the country has come under pressure from the Biden administration and EU to stop doing business with Moscow in order to cut off Kremlin’s access to oil revenue and funds.

India has reiterated that its volume of imports from Russia are minuscule as compared to Europe’s purchases, and just a tiny fraction of the country’s total consumption.

Growing markets for Russian oil

India and other Asian nations are becoming an increasingly vital source of oil revenues for Moscow despite strong pressure from the US not to increase their purchases, as the European Union and other allies cut off energy imports from Russia in line with sanctions over its war on Ukraine.

Such sales are boosting Russian export revenues at a time when Washington and allies are trying to limit financial flows supporting Moscow’s war effort, The Associated Press said in a report.

In total, India has guzzled nearly 60 million barrels of Russian oil in 2022 so far, compared with 12 million barrels in all of 2021, the report said.

Shipments to other Asian countries, like China, have also increased in recent months but to a lesser extent.

Chinese state-owned and independent refiners also have stepped up purchases. In 2021, China was the largest single buyer of Russian oil, taking 1.6 million barrels per day on average, equally divided between pipeline and seaborne routes, according to the International Energy Agency.

While India’s imports are still only about a quarter of that, the sharp increase since the war began is a potential source of friction between Washington and New Delhi.

Why purchasing pattern changed

Since Russia’s invasion of Ukraine in late February, global oil prices have soared, giving refiners in India and other countries an added incentive to tap oil Moscow is offering them at steep discounts of $30 to $35, compared with Brent crude and other international oil now trading at about $120 per barrel.

Their importance to Russia rose after the 27-nation European Union, the main market for fossil fuels that supply most of Moscow’s foreign income, agreed to stop most oil purchases by the end of this year.

https://energy.economictimes.indiatimes.com/news/oil-and-gas/how-ukraine-war-is-changing-indias-oil-purchase/92192677

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