Russian oil prevails in India's July imports despite refinery shutdowns

Low discounts fail to impact pecking order; continuing reliance on Russian supplies helps prop up GRMs of refiners

Despite a slew of local refining shutdowns, low discounts on Russian crude and reduction in exports, Russia continued to prevail in India’s crude basket in July and displaced Gulf grades and US oil, according to industry sources and shipping data.

Russian oil accounted for close to 45 per cent of India’s overall 4.69 million barrels per day in July, marginally higher from 44.4 per cent share in June of 4.6 million bpd of imports, and compared to a 44 per cent share a year earlier, according to market intelligence data from Paris-based Kpler. Russia had a record 46 per cent share of the Indian oil imports market in May 2023.

Cuts in Russian output did not seem to affect supplies to India. Russia’s seaborne crude exports in the first half of July declined by around 400,000 bpd compared with June to 3.2 million bpd, data from US group Energy Intelligence shows, reflecting the importance given by Moscow to New Delhi, industry officials said.

The share of West Asian oil, led by Iraq, Saudi Arabia, United Arab Emirates and Kuwait was a combined 38 per cent, around 7 percentage points lower than Russia. Iraqi shipments, India’s biggest source of crude until 2022, was around half of Russian oil supplies in calendar year 2023, and fell to the lowest in over four years in July as China and Europe compete for limited supplies, according to ship tracking data.

Russian crudes retained their share this month at the cost of US and Iraqi grades. Imports of US oil dropped by 30 per cent to 260,000 bpd this month from 372,000 bpd while Iraqi supplies at 706,000 bpd was lower by around 100,000 bpd from June. The share of US oil dropped by 2.3 percentage points on the month to 5.7 per cent in July and the share of Iraqi oil declined by over 2 percentage points during the period to 15 per cent.

The continuing reliance of Russian supplies helps prop up gross refining margins of Indian refiners, which are facing shrinking cracks on diesel and petrol, and lower marketing margins on fuel sales amid rising crude rates. Bharat Petroleum accounts for about 40 per cent of BPCL's overall crude processing, said company CFO Vetsa Ramakrishna Gupta in the latest analysts call.

Indian refiners typically do maintenance in their refineries in July-September, a period of lower demand during the peak monsoon period. Indian Oil’s Paradip, Haldia and Mathura, Bharat Petroleum’s Bina and Kochi, Nayara’s Vadinar and Reliance’s Jamnagar will undergo scheduled maintenance during this period, Argus data show, reducing a need for crude oil.

There were two distinguishing factors marking the ascendancy of Russian crude in July. First, discounts on Russian crude have collapsed by more than half to around $4/barrel this month compared to over $10/barrel a year earlier. Second, Russian crude has continued to displace Gulf crudes despite cuts in official selling prices (OSP) by Saudi Aramco—demonstrating the competitiveness of Russian oil.  For instance, in May, for which the latest customs data on import prices are available, Russian barrels to India averaged $83.7 per barrel on a delivered basis compared to $89/bbl for Saudi Arabia. 

Indian refiners attributed shrinking discounts to more demand worldwide for Russian benchmark Urals, and reduced uncertainties in shipments of Russian oil. Two Mumbai-based refiners expect discounts to stay in the $3.5-$4.5/barrel range for the rest of the year.