India's US crude imports rebound as Washington tightens screws on Russia

India may have bought over $1 bn of US oil in August; increasing such shipments helps it to trim trade surplus with the US

Even as Russia and West Asia have been slugging it out for market share in India to sell their crude oil, the US is quietly making its moves on the sidelines. The US has doubled its share of the Indian crude market in the last few months, as per industry sources and ship-tracking data.

Some of the increase in America's market share may have come at the expense of Russia, India’s biggest crude oil supplier, said industry sources.

India may have bought over $1 billion of US oil in August, according to calculations by Business Standard based on ship-tracking data and June-delivered prices from Indian Customs. The US this year targeted Russian light, low-sulphur grades, also called sweet crudes, which are priced at a premium compared to dirtier grades, with sanctions, prompting Indian refiners to seek similar grades elsewhere, mainly from America, refining officials said. For instance, supplies of US WTI Midland, a light, low-sulphur grade, increased by 24 per cent this year to 128,000 BPD (barrels per day) from a year earlier.

India's shipments of crude oil from the US, bought on spot terms, surged in August to a 19-month high at around 371,000 BPD, according to data from Paris-based market intelligence agency Kpler. Volumes were higher on the month by 106,000 BPD, or by 40 per cent, and more than doubled from 164,000 BPD a year earlier. The share of US crude in India’s crude cocktail basket jumped to 8.3 per cent last month from 3.7 per cent a year earlier.

Higher imports of US oil also helps mollify Washington, which has been critical of India sourcing Russian crude, officials said, though they clarified that purchase decisions are based on economics.

“The increase has come from loadings of higher Canadian heavy crude from the US, which is driven likely by margins,” said Serena Huang, head of Asia-Pacific analysis for market intelligence provider Vortexa. Prices of Canadian heavy, acidic grades trade at hefty discounts of $10/barrel (BBL) to European benchmark Brent crude but Reliance is the only refiner which can process these crudes on a sustained basis, said industry officials.

While dirty Canadian crudes shipped from the US to India accounted for 35 per cent of overall US export volumes in August, the rest came from sweet grades.

“Indian refiners lift US sweet crudes based on situational demand, and when they need to replace Mumbai High or Russian sweet crudes like Sokol,” said R Ramachandran, Mumbai-based energy expert and former refining head of Bharat Petroleum.

The US turned the heat on premium Russian grades like Sokol, a light, sweet oil, from December by sanctioning ships, leading to disruption of supplies to Indian Oil, according to shipping data. That forced Indian refiners to seek oil from the US and Nigeria.

Ramachandran said that another reason for the surge in US sweet grades in August could be maintenance of some units like hydrocrackers in refineries, which resulted in a higher draw on sweet crudes.

The trend in imports of US WTI light, sweet grades, which is the biggest US grade imported by India, has also tracked prices of the underlying US crude benchmark. WTI rates slumped to around $73/BBL in early June from as much as $87/BBL in early April. Prices subsequently rose to $83/BBL in early July before declining by $11/BBL in late August, official data shows.

India imported 324,000 BPD of US crudes in June compared to just 144,000 BPD a year earlier, according to official data from the US Energy Information Administration.

An increase in US shipments helps trim India’s trade surplus with the US, an expansion of which led New Delhi in the first place to pursue oil imports from America during former president Donald Trump’s administration, Indian officials said.

The purpose of tightening screws on Russian oil exports was intended to pressure Moscow to exit Ukraine by depriving it of revenues from oil sales, US officials have said. But the act of piling pressure on Moscow’s shipping fleet instead led to the revival of US and Canadian grades in India’s crude basket.

US sales also bucked India’s overall crude oil import trend in August, which declined by around 6.6 per cent from July to 4.5 million BPD. Shipments of Russian crude to India dropped by 15 per cent to 1.8 million BPD. The share of Russian oil also dropped by over 3 percentage points to 40 per cent, ship-tracking data showed, after savings on the crude fell to record lows.

Shipments of US crude to India peaked in 2021, averaging 410,000 BPD, rising 67 per cent from 2020, ship-tracking data showed.