Russia continues hold on Indian oil supplies; West's price cap threat looms

India will be unable to use Western tankers and insurance if it refuses to adhere to price cap

Russia continued to exercise its dominance over India's crude oil market for the third consecutive month in November, surpassing traditional West Asian suppliers Iraq and Saudi Arabia, according to data from western commodity analytics firms and Indian customs. Proposed sanctions by the US and EU on Russian oil from early December may blunt the competitiveness of Russian grades after discounts played a key role in Russia’s surging share of the Indian fuel market.

Russia shipped around 909,400 barrels a day of crude to India in November, up by around 7,000 barrels a day from October, according to data as of Thursday from Vortexa, a London-based commodity intelligence provider. Paris-based commodity data provider kPler pegged Russian supplies at 815,000 barrels a day as of November 27. Both the agencies track ship movements to calculate oil shipments, which constantly change, especially in Russia’s case, where, to evade sanctions, tankers change destinations or transfer cargoes to other vessels mid sea.

The fate of Russian supplies in December rests on the outcome of a price cap that western nations plan to impose on December 5. India and China are yet to agree to a ceiling on Russian crudes while Moscow has threatened to stop oil shipments. However, India will be unable to use Western tankers or insurance if it refuses to adhere to the price cap, and, unlike China, it solely depends on western transporters and reinsurers to ship its fuels.

"As it is, there is no full EU unanimity on the price cap, particularly shipping nations like Malta and Greece don't want the cap since it will have a negative effect on their shipping industries which play a key role in Russian oil exports,’’ said Tilak Doshi, a London-based oil industry expert.

The proposed cap of around $65-$70/barrel is at or near the actual prices of Urals paid for by India, so the cap is not a binding constraint, which makes the whole exercise irrelevant, said Doshi, who has worked in senior positions at Saudi Aramco and Unocal.

Iraq supplied around 861,500 barrels a day last month followed by Saudi Arabia at 571,000 barrels a day, Vortexa data showed. That compares with 891,000 barrels a day and 695,000 barrels a day respectively in October. Russia accounts for a fifth of India’s crude imports, and together with Iraq and Saudi Arabia accounts for over half of India’s supplies.

Russian supplies have dropped in the last two months from a record 1.24 million barrels a day in September, according to Indian customs data. Customs data accounts for delivered cargoes and is typically in variance with ship tracking information.

The EU and China continued to be the biggest purchasers of Russian fossil fuels in the week of November 21-27, according to the Centre for Research on Energy and Clean Air. Turkey came third, South Korea fourth, and India fifth. The EU paid over 2 billion euros for Russian supplies followed by China at over a billion euros. India paid only a tenth of what China paid.

Russia’s medium sour Urals, similar to some West Asian grades, such as the Arab medium, is suited to Indian refiners when available at a discount on a delivered basis, but the availability of the grade was an issue in the past since Europe and China consumed most of the Russian oil.