India’s appetite for Middle Eastern crude strengthened year on year in the first half of 2024 as logistics and shipping issues slowed imports from Russia, but analysts and trade sources say that term deals for Russian products could tilt the equation back in favor of the world’s top non-OPEC supplier.

Although policy makers in New Delhi and Moscow have said both countries are open to the idea of term crude contracts, Indian refiners are erring on the side of caution in signing deals as the threat of additional sanctions risks complicating shipping and payment terms in the future.

“During H1 2024, Indian imports of Russian crude contracted 153,000 b/d on the year due to a sluggish first quarter as global oil prices climbed, including that of Urals,” said Mark Esposito, senior principal research analyst with S&P Global Commodities at Sea. “Indian imports of Russian grades fell to 1.587 million b/d during Q1 2024, which was the slowest quarterly pace of inflows since Q4 of 2022.”

India imported 1.77 million b/d of crude from Russia in H1 2024, accounting for 36.6% of its total inflows, down from 1.93 million b/d in H1 2023, when it accounted for a 39.5% market share. Indian imports include Russian oil transferred at sea and received via ship-to-ship transfers, CAS data showed.

Meanwhile, Middle Eastern crude inflows were around 2.22 million b/d, or 45.9% of India’s total imports in the first half of the year, compared with 2.21 million b/d, or 45.3% of the volume during the same period in 2023.

“India’s import of Russian oil increased post the Russia-Ukraine war due to huge price discounts after sanctions from other countries,” said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis. “However, with the supply glut depressing prices and with issues with transport from the Red Sea region, imports from the Middle East went up.”

Term contracts

India received 1.96 million b/d of Russian crude in Q2 2024, the highest quarterly volume since Q2 2023. About 2.10 million b/d of Russian crude landed in India in June, the most since July 2023, according to CAS. Preliminary CAS data shows another 1.97 million b/d arriving in July, as Indian refiners’ appetite for Urals has been robust.

“Among Indian refiners, Reliance Industries Ltd. and Indian Oil Corp. have emerged as the top buyers of Russian crude oil, although all refiners in India have Urals included in their crude basket in varying proportions,” said Himi Srivastava, South Asia oil analyst at S&P Global Commodity Insights.

Russian Deputy Prime Minister Alexander Novak said July 9 during a visit to Moscow by Indian Prime Minister Narendra Modi that India and Russia were considering the possibility of long-term term contracts for Russian crude supplies as the two countries deepen their energy ties.

“Most recently, state-run refiners have entertained the prospect of long-term import deals with Russia, a move that would further cement the relationship that only blossomed following the February 2022 invasion,” Esposito said.

Analysts and traders say that long-term agreements between Russia and Indian refiners can help lock-in prices, providing stability and predictability. Apart from ensuring consistent and reliable supplies of Russian crude oil, Indian buyers can look at securing better pricing terms through long-term agreements due to the commitment they are providing, compared with potentially higher spot prices.

“Signing of term Russian deals will likely ensure continued supply of Russian crudes into the market but this signing is expected to be dependent upon suitable discounts and arbitrage margin versus the benchmark Middle East grades,” said Tushar Bansal, senior director at Munich-based consultancy EY Parthenon.

Platts, part of Commodity Insights, assessed Urals FOB Primorsk at a $12/b discount to Dated Brent on July 26. The discount was the narrowest since before Russia invaded Ukraine in February 2022 and has been at this level since July 24.

Source: Platts