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India's crude imports could face problems in 2025 due to geopolitical risks

The US Energy Information Administration predicted global oil price benchmark Brent to average $73.58 per barrel in 2025 in its latest short-term energy outlook

oil and gas, oil, oil import
Calendar 2024’s crude import data offer pointers to the role of suppliers. (File Image)
S Dinakar
5 min read Last Updated : Dec 31 2024 | 11:30 PM IST
India’s growing imports of crude oil, a looming threat to the country’s energy security, may face a turbulent 2025 amid geopolitical winds emerging from the new Donald Trump administration, Russian President Vladimir Putin’s manoeuvres in Ukraine, tightening sanctions on Iran’s oil, and escalating Houthi rebel attacks, industry executives said. 
However, copious oil supplies amid growing global output and slowing Chinese oil consumption will put India in a better bargaining position with Gulf suppliers, who are in talks to renew annual crude supply contracts. 
As a result, the crude import bill, a growing strain on the country’s trade deficit, may ease in 2025 as crude prices are expected to average lower on the year at $75 per barrel. Meanwhile, senior refining executives said the ratio of ethanol in the country’s fuel mix may increase by 5 percentage points. 
According to rating agency ICRA, no major refining capacity additions are expected in 2025, barring a gradual commissioning of Hindustan Petroleum Corporation’s (HPCL’s) 180,000 barrels-per-day refinery in Barmer, Rajasthan. 
Petrol constitutes around 17 per cent of the country’s fuel use mix and is expected to grow at over 5 per cent annually — higher ethanol blending will compensate for petrol’s growth, putting a lid on oil imports, executives said. 
The US Energy Information Administration predicted global oil price benchmark Brent to average $73.58 per barrel in 2025 in its latest short-term energy outlook. It forecasts non- Organization of the Petroleum Exporting Countries Plus liquids output to grow by 1.5 million barrels per day (bpd) during the period, while global demand growth is expected to be only 1.3 million bpd.
India’s oil demand, the biggest contributor to global demand growth along with China, is expected to grow by over 300,000 bpd in 2025, compared to 200,000 bpd in 2024. 
Imports of crude oil averaged $11.1 billion a month in 2023-24 (FY24), when India’s crude oil basket averaged $82.6 per barrel, with rates ranging from a high of $93.5 per barrel in September to a low of $73.4 per barrel in June. 
Monthly imports have averaged higher at $11.5 billion this financial year (2024-25) until November, but average oil prices are on a decline. In December, India’s crude oil basket averaged $73.2 per barrel compared to $89.4 per barrel at the beginning of the financial year. 
2024’s crude import data offer pointers to the role of suppliers. India’s imports of oil increased by a meagre 1.6 per cent in 2024 from a year earlier to around 4.7 million bpd, while Russia, the country’s biggest oil supplier, saw its share stay flat or even shrink marginally to around 38 per cent, according to data (as of Tuesday) from Paris-based market intelligence agency Kpler. 
Top refining executives said that state-run refiners are facing some shortfalls in Russian supplies in January, and to a lesser extent in February. However, overall Russian supplies to India will be maintained in 2025 unless the US manages to affect a truce in Ukraine, diverting Russian oil flows to its traditional European market, a private sector refiner said. 
Indian Oil Corporation (IndianOil), Bharat Petroleum Corporation, and HPCL are facing shortfalls in sourcing Russian oil after private-sector refiner Reliance Industries (RIL) increased its draw on discounted Russian oil to maintain refining margins. 
RIL is seeking to substitute falling Venezuelan volumes with Russian oil, industry executives said. The refiner has typically gained from heavily discounted Venezuelan heavy, acidic oil grades in the past — in the past, it has accounted for over a fifth of RIL’s crude imports, prompting it to seek a licence from Washington to continue importing from the Latin American nation.  But Venezuelan supplies averaged only 59,000 bpd this year, a quarter of the 212,000 bpd it secured in 2019, according to Kpler data. 
Moreover, state-run refiners are facing limitations in processing Russian crude beyond the current 35-40 per cent levels because of refinery configuration issues and Washington’s sanctions, which effectively put a cap on Russia’s share of India’s crude market at less than 40 per cent. Russia supplied 1.78 million bpd in 2024, compared to 1.79 million bpd in 2023.
RIL’s share of Russian crude 
fell to 22 per cent last year at 401,000 bpd from 24 per cent in 2023 after discounts on the oil reduced by more than half to $3-$4 per barrel, and Venezuela resumed supplies to RIL. 
RIL processed 1.26 million bpd of crude oil in FY24, according to oil ministry data. 
IndianOil was the second-biggest buyer of Russian oil last year, accounting for 19 per cent, a steep fall from 26 per cent in 2023 after it failed to renew term contracts with Russian state-run oil companies. 
Iraq and Saudi Arabia were the second- and third-biggest suppliers of oil to India at 20 per cent and 13.5 per cent shares, respectively, in 2024. Iraq’s share of India’s oil market was flat from 2023, but the Saudi share slipped by 1.5 percentage points. The share of US oil has more than halved to 4 per cent last year from 2021, but Trump’s return will put pressure on state-run refiners to increase US oil purchases, executives said. 
 

Topics :India oil importsOil importsIndian oil import

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