Home / Commodities / Freight News / India’s long-term appetite for Russian crude intact despite recent slowdown

India’s long-term appetite for Russian crude intact despite recent slowdown

India’s insatiable appetite for Russian crude has suddenly slowed due to a rise in Middle Eastern flows, widespread refinery maintenances and increased scrutiny on ships carrying Russian oil, but inflows are likely to bounce back in coming months and help the largest non-OPEC exporter maintain its position as the country’s top supplier in the foreseeable future.

After rising to an all-time high of 2.1 million b/d in June and remaining as high as 1.69 million b/d in September, imports of Russian crude by Indian refiners have shown a declining trend in recent months.

According to S&P Global Commodities at Sea data, Russia remains India’s primary crude oil supplier, accounting for about 33% of the total crude imports, or 1.51 million b/d, in October, and 35% of the total crude imports, or about 1.55 million b/d, in November.

While some state refiners are rushing to fulfill term commitments with Middle Eastern suppliers, the removal of sanctions on Venezuela has whetted the appetite of private Indian refiners to resume purchases from the South American supplier. These developments have also contributed to a slowdown in Russian purchases.

“Several factors have contributed to the decline in Russian imports. Elevated maintenance activities during October and November resulted in an overall reduction in crude imports. Crude imports from Iraq, the UAE, Saudi Arabia and Kuwait have experienced a slight uptick in October and November. And lastly, refiners are expressing concerns about shipping and insurance,” said Sumit Ritolia, refinery economics analyst at S&P Global Commodity Insights.

Peak maintenance

India’s refinery crude distillation unit maintenance peaked in October around 600,000 b/d. Reliance Industries completed the scheduled turnaround of a 327,000 b/d CDU at its 630,000 b/d export-oriented facility in mid-November. This unit had been offline since the second half of September for routine maintenance.

In addition, Reliance increased its imports of fuel oil from Russia to 197,000 b/d as of Oct. 23, from around 140,000 b/d observed during August and September. This increase aimed to capitalize on high middle distillate margins by processing fuel oil directly in the secondary unit to enhance middle distillate yields, according to S&P Global.

“Russian crude imports experienced a slight decline at the onset of this quarter, attributed to various factors. Externally, challenges such as escalating freight costs and complications in repatriating rupee payments to Russia played a role,” said Rajat Kapoor, managing director for oil and gas at Synergy Consulting. “Internally, factors such as local refinery downtimes and a decrease in fuel demand in India post Diwali contributed to this decline.”

The slight uptick in crude imports from Iraq, the UAE, Saudi Arabia and Kuwait in October and November can be attributed to the necessity of fulfilling term commitments by public sector oil refiners to state oil companies. Typically, inflows can fluctuate by about 10% of their term commitments.

“It is evident that Russian crude imports by private refiners have remained robust. However, there has been a slight decline in imports by state refiners,” Ritolia said.

Trade sources and analysts also said that refiners are currently expressing increasing concerns about rising shipping costs and insurance.

Revival expected

With crude prices dipping below the psychologically crucial $80/b mark, despite OPEC+ production cuts, India could again record steady Russian crude volumes. As the winter season sets in, demand for diesel is expected to pick up in Europe, and with India now being a major fuel exporter to the continent, Indian refiners are expected to increase their refinery runs, which would boost their demand for crude.

“Russian crude has found a welcome market in India, and unless stringent price-cap sanctions are rigorously enforced, which seems likely, India looks to continue buying and processing Russian crudes,” Kapoor said.

In addition, with Venezuelan crude available in the market, some Indian refiners are expressing interest in purchasing discounted Venezuelan crude to diversify their imports.

“The oil market has ample supplies at the moment. In addition, the market is already looking into February loadings and end February-March processing cargoes,” said Tushar Bansal, senior director at consultancy EY Parthenon, based in Munich. “Seasonally, crude demand declines from the peak in February. Hence buyers would look at competitively priced barrels for their crude diet. Going forward, Venezuelan barrels are expected to add further to the supply mix, providing Indian buyers with ample choices.”

Indian refiners started snapping up crude shipments from Venezuela barely weeks after the sanctions eased, opening a new battleground for Chinese independent refiners that have been the most active buyers of the feedstock from the South American supplier in recent years.

Shipping fixtures showed that India had returned to the market for November- and December-loading cargoes of Venezuelan crude after a three-year suspension since September 2020.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping
error: Content is protected !!