Russia bounces back to become India's second-largest crude supplier in Sep

Russia bounced back to become India's second-largest crude oil supplier in September. Indian refiners returned to the market after completing maintenance of their facilities and diversified purchases of Russian grades, according to data from three European commodity analytics firms. 

Russian oil has become the mainstay of Indian refiners in only six months, a position which took decades for West Asian suppliers and the US to achieve.

Russian supplies, primarily of Urals, increased by around 15 per cent from August, reflecting a hardening of India's position against US overtures to reduce Russian oil sales to India. Moreover, Indian refiners expanded their basket of Russian crudes last month by adding 15 per cent ESPO blends, rarely imported by India, 6 per cent of Arco and 3 per cent of Novy Port Light to their overall Russian supply mix.

Russia supplied 908,000 barrels a day of crude in September, according to data from Vortexa, a London-based provider of commodity intelligence. India imported 842,000 barrels a day of Russian oil compared to 732,000 barrels a day in August and 888,000 barrels a day in July, Kpler, the Paris-based commodity analytics firm, said. Saudi Arabia was the biggest supplier at 869,000 barrels a day, while Iraq came in third at 814,000 barrels a day, Kpler said.

"Indian appetite for Russian crude remains strong, even amid refinery maintenance and lower total crude imports in September, a reflection of ongoing steep discounts, attractive pricing," said Matt Smith, an analyst with Kpler. An official from a state-run refiner said that discounts for Russian crude may have dropped from June/July levels, but the crude is still cheaper than US, African and many West Asian grades.

"India's imports follow a clear inverse relationship with the discount on Russian oil - as the discount widens, as it has again in the past month, more oil heads to India," said Lauri Myllyvirta, lead analyst, Centre for Research on Energy and Clean Air. In August, Russian oil cost around $100 a barrel, a dollar a barrel more expensive than Iraqi oil, according to Indian customs data. September crude costs are not available.

Shipments of Russian oil to India will further increase in October and November as the deadline to place a price cap on Russian oil nears, and Indian oil demand picks up during the festivals.

"India's crude imports in September have rebounded from the dip in August, but remain well below the peaks in June and July," said Serena Huang, an analyst at Vortexa. "Ongoing and upcoming seasonal refinery maintenance at several of the refineries this quarter has reduced the refiners' crude import appetite but refiners should be stepping up their crude purchases next month to meet higher domestic demand during the festive season next quarter, and higher diesel demand from Europe. "

Indian refiners are also boosting imports of Urals grade ahead of a price cap that the US and Europe plan to impose on Russian oil from early December, an industry official said. China, India and Turkey, the biggest Russian oil buyers, have yet to agree to the proposal.

Russian shipments in August had given the impression that India was accommodating US interests, but the resurgence in September shows a marked preference for Russian grades backed by New Delhi. Prime Minister Narendra Modi has clearly emphasised the importance of growing Indo-Russian energy ties at the recently concluded Shanghai Cooperation Organisation summit in Uzbekistan, which foreign minister Jaishankar stressed during his trip to Washington on the importance of having affordable oil for the developing world.

Saudi Arabia, the world's top oil exporter, became India's leading oil supplier in September for the first time this year, shipping 965,000 barrels daily. Iraq came third at 836,000 barrels a day after being India's biggest supplier this year, according to Vortexa data.

According to Indian customs data, Iraq was India's biggest oil supplier this year, with August volumes at 951,000 barrels a day. Customs data differs from data provided by agencies that track shipping movements.

Iraq's share of India's total crude purchases has declined by three percentage points to 23 per cent in August from 26 per cent in June, while the share of Russian exports in India's overall crude purchases rose by two percentage points to 20 per cent in August from June, according to customs data. According to customs data, Russian and Iraqi crude cost the same at around $100 a barrel, while Saudi grades were priced higher at $115/barrel. The Indian crude oil basket averaged $97 a barrel.

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