 "oil, crude oil")
India’s flow of cheap crude oil from Russia and Venezuela continued unabated in March, defying market expectations, as local refiners tweaked their sourcing strategies. They sourced cheaper grades to evade tighter US sanctions, according to industry sources and ship-tracking data.
Russian supplies to India increased by around 8.5 per cent to 1.66 million barrels per day (bpd) (in March 2024), the highest since November 2023, from 1.53 million bpd in February 2024, according to data from Paris-based market intelligence agency Kpler. The data is as of Monday.
This was contrary to market expectations and media reports that tightening of US sanctions will lead to a decline in crude imports.
India is absorbing record volumes of Urals, the cheapest Russian crude grade of medium, higher sulphur variety — replacing more expensive light, sweet Russian crudes in the process to circumvent US sanctions on higher-priced Russian oil.
India may receive 4 million barrels of Venezuelan crude, the cheapest among all crude sources, in April, lower from 4.78 million barrels in March. This comes as Washington considers extending a six-month reprieve of US sanctions ending April 18. Venezuela may secure an extension from the Biden administration, Indian industry officials said.
Both Russia and Venezuela are among India’s cheapest crude suppliers along with Iraq, and Indian refiners depend on these cheaper, higher sulphur crudes to shore up margins.
Indian Oil and others have kept pump prices of petrol and diesel, and, to a large extent residential LPG, flat for nearly two years on New Delhi’s prodding, despite fluctuating rates in the global market.
Shipments from Iraq averaged 1.16 million bpd last month, 50 per cent higher from February, but in line with a 1.05 million bpd average for the last three months, Kpler data shows.
Iraqi supplies have increased after the Red Sea conflict interrupted shipments of Iraqi oil to Europe, which was paying more than Asian buyers, industry sources said.
Saudi Arabian supplies dropped to 755,000 barrels a day in March from over 850,000 barrels in February after Aramco increased prices in March, a Mumbai-based refiner said.
Import of US crude in March declined to 113,000 barrels a day from 174,000 barrels in February with the conflict in the Red Sea delaying supplies and increasing shipping costs.
Venezuela was India's cheapest supply source in January at $61.60 per barrel on a delivered basis, coming below Iraqi oil, the second-cheapest crude that month, by over $16/barrel, according to calculations based on Indian customs data.
Venezuelan Merey crude is much cheaper because it is heavy, contains high sulphur and difficult to process.
Reliance Industries’ Jamnagar and Nayara Energy’s Vadinar refineries are well suited to process Merey because of their high complexity. Indian Oil’s Paradip and HMEL’s Bhatinda plants are also beginning to source such grades. Venezuela has shipped three cargoes of Merey crude for April delivery. Two of them will reach Jamnagar and the third will discharge at Paradip, site of Indian Oil’s refinery.
Iraqi oil cost $77/barrels (bbl) in January on a delivered basis while Russian oil averaged $79/bbl, customs data showed.
Other Middle East crudes are much more expensive. Prices of Saudi crude imports averaged $87/bbl in January while crude sourced from the United Arab Emirates (UAE) came in at over $92/bbl.
India increased its share of Russian export benchmark Urals, a medium, sour grade, to 83 per cent last month, from 76 per cent in February, of the total Russian supplies. Urals can be adjusted to reflect a free on board (FOB) price of below $60/barrel above which the G-7-mandated price cap and sanctions kick in, Indian refinery officials said.
Washington has sanctioned over 50 tankers carrying Russian oil, accusing them of trading fuel cited above the price cap. These fuels are typically premium grades like Sokol, which Indian refiners have started avoiding since December.
