Oil imports from India to Russia rise to 10-month high due to Ukrainian drone strikes

This is reported by the Indian Express.

According to the data, the increase in imports of discounted Russian oil to India over the past few months has hit flows from Saudi Arabia the hardest.

Indian refiners imported a total of 1.96 million barrels per day of Russian crude oil in May, the highest since July 2023 and almost 3% more than the volumes imported in April, according to preliminary ship tracking data from the commodities division of analyst firm Kpler. May also marked the fifth consecutive month of growth in Russian oil imports to India.

"Russian refinery runs have been counter-seasonally low because of the Ukrainian drone strikes, so there was more crude going into the wider markets for exports," said Viktor Katona, head of oil analysis at Kpler.

Oil imports from Saudi Arabia, India's third-largest crude market, fell by almost 13% to 0.55 million barrels per day, the lowest since September last year.

The main reason for the decline is the availability of sufficient Russian crude oil, which continues to maintain a price advantage over Riyadh's oil.

"The (Indian refiners’) decision to minimise imports (from Saudi Arabia) is solely a commercial one, reflective of the fact that there remains a $5-6 per barrel difference between the pricing of Saudi and Russian barrels. So, basically, it is direct displacement (of Saudi Arabian crude)," Katona said.

The supply of Urals medium sour crude oil - the main grade of crude oil in Russia and the bulk of Russian oil purchases in India - to Indian refineries reached a record high in May at 1.53 million barrels per day, accounting for more than 78% of Russia's oil imports to India. Apparently, the price difference between Urals and competing crude oil grades from India's traditional West Asian suppliers was significant enough for Indian refiners to prefer the Russian grade, the newspaper writes.

May also marked a 10-month high in oil imports to India from the United States, New Delhi's fifth largest source of crude oil. In May, Indian refiners imported a total of 0.21 million barrels of crude oil per day from the US, up 4.5% from April and the highest since July last year. The increase in imports from the US is likely due to the fact that US crude has become relatively cheaper than similar grades from West Asia.

"India’s oil imports from the US mostly are of light sweet grades that are routinely blended with heavier barrels from Russia, Iraq, and Saudi Arabia. Considering Dubai is now the strongest benchmark, trending higher than Brent for more than a month already, the arbitrage of relatively cheap US barrels into India is fairly open. The commercial advantage is there," said Katona.

In terms of market share, Russia accounted for almost 41% of the total 4.79 million barrels of crude oil imported into India in May. This is the second month in a row that Moscow's share of New Delhi's oil imports has been 40% or more. Russia's share fell to about 33% in the four months preceding April, from a peak of almost 46% in May 2023, the data show.

Iraq, India's second largest source of oil, accounted for a fifth of New Delhi's oil imports in May, while Saudi Arabia's share was 11.4%.

Before the war in Ukraine, Iraq and Saudi Arabia were the two largest suppliers of crude oil to India. But when the West began to cut off Russian energy supplies after Russia's invasion of Ukraine in February 2022, Russia began offering discounts on its oil, and Indian refiners began snapping up the discounted barrels.

• Imports of Russian oil to India in April rose to a maximum compared to the last 9 months, as Russia uses tankers that are not under sanctions for deliveries.