Russian crude imports plunge 26% in August; cost cushion for India begins to thin

The sharp decline pushed Russia’s share in India’s crude basket down nearly 11 percentage points to 45% from 55.9% in July, according to Kpler data. India’s overall crude imports fell 8.4% to 4.62 million bpd, from 5.04 million bpd in July. At around 4.7 million bpd, however, August imports were still the highest for the month in five years, according to Natalia Katona, an independent commodity analyst based in Abu Dhabi.

“August was less a story of India voluntarily stepping away from Russian oil than of Russia having fewer barrels to offer,” Katona said.

She attributed the fall to lower Russian seaborne exports, more expensive and riskier Black Sea shipments and stronger competition from Chinese refiners for available cargoes. Maintenance shutdowns at some Indian refineries also contributed to lower crude intake.

Disappearing Discounts

The supply pressure comes as the price advantage that made Russian crude attractive to Indian refiners is also fading.

“It looks like the period of heavily discounted Russian oil appears to be coming to an end,” Katona said. Russian crude is now trading around parity with dated Brent and, in some cases, at a small premium to ICE Brent, she added.

The decline is particularly significant as freight costs on India’s major crude sourcing routes have already risen sharply amid disruptions around the Strait of Hormuz.

The cost of shipping crude on a VLCC from Saudi Arabia’s Ras Tanura to India rose 411% to $4.34 per barrel in August, from $0.85 per barrel before the conflict began on February 28. Freight from Russia’s Ust-Luga port to India on Suezmax tankers has increased 137% to $19.90 per barrel, from $8.40 in February. War-risk insurance for a single Hormuz voyage has climbed to around $7.5-10 million, against about $250,000 before the conflict.

Pivot to Alternative Suppliers

With Russian volumes declining, Kpler data showed Indian refiners turning more heavily to some alternative suppliers in August.

Imports from Venezuela surged 60.2% to nearly 350,000 bpd from 218,416 bpd in July. UAE shipments increased 8.9% to 512,377 bpd, while supplies from Iraq rose 26.3% to 162,746 bpd.

Angolan crude imports increased more than six-fold to 193,863 bpd, from 30,924 bpd in July. Kuwait supplied 90,605 bpd, compared with just 6,887 bpd in the previous month.

However, supplies from several other producers declined. Saudi Arabian shipments fell 19.9% to 331,655 bpd, while imports from Brazil dropped 54.5% to 90,651 bpd. US crude shipments declined 12.7% to 109,419 bpd, while Nigerian supplies rose 2.2% to 97,204 bpd.

Sourcing replacement barrels from farther markets is also becoming costlier. Freight on the Corpus Christi-India route has risen 150% to $15.86 per barrel, from $6.35 before the conflict.

“This is increasing freight costs and exposure to maritime disruption,” Katona said. “If this continues, it will squeeze refinery margins, raise India’s import bill and could eventually feed through into domestic fuel costs.”

India’s crude import bill had already risen 60% year-on-year in April-June, while the July bill was 41% higher from a year earlier, amid elevated oil, freight and insurance costs.

Competition for Russian supplies could intensify further. Katona said Iranian barrels being effectively trapped inside the Gulf by the US blockade, coupled with a recovery in Chinese crude demand, gives Chinese refiners a stronger incentive to chase Russian cargoes traditionally bought by India.

“As long as the US-Iran crisis persists, competition for Russian crude, and consequently its price, is likely to keep rising in Asia,” she said.