Key facts
- India's total crude imports hit a record 5 million bpd in June.
- Russian oil constituted a record 54% of India's total crude imports in June.
- India resumed Iraqi crude imports via the Strait of Hormuz despite shipping risks.
- Middle Eastern oil supplies to India were significantly impacted by disruptions in the Strait of Hormuz.
- Gulf exporters are offering discounts and employing ship-to-ship transfers to mitigate shipping risks.
India has resumed importing crude oil from Iraq via the Strait of Hormuz, despite ongoing shipping risks, as its overall crude imports reached a record 5 million barrels per day (bpd) in June. Russian oil constituted a historic 54% of these imports, totaling 2.6 million bpd, filling a significant gap left by disruptions in Middle Eastern supplies.
India's fuel consumption saw a 3.7% decrease in June, but record crude imports suggest refiners have compensated for the collapse in Gulf supplies caused by the Strait of Hormuz crisis. The country's limited Strategic Petroleum Reserve (SPR) capacity means maintaining import volumes is crucial for energy security.
Iraq's crude supply to India had virtually disappeared for three months before resuming in late June. Kuwait also vanished from the import mix, while Saudi Arabia's supply fell significantly, though it could still export via the Red Sea. The UAE emerged as India's second-largest supplier. These shifts occurred as Gulf exporters faced pricing challenges and logistical hurdles.
Ukrainian strikes on Russian refining infrastructure have inadvertently freed up more crude for export, coinciding with slower Chinese demand. This combination has left more Russian barrels available for India. Major buyers of Russian oil include Indian Oil Corporation and Reliance Industries, while Nayara Energy's refinery imported only Russian crude in June.
With the recovery of traffic through the Strait of Hormuz since a US-Iran ceasefire on June 18, Gulf exporters are offering discounts and using ship-to-ship transfers to de-risk shipments. This is putting pressure on freight rates and changing the economics of sourcing for India, making Middle Eastern barrels increasingly discounted and geographically favorable compared to longer-haul options.
While Middle Eastern barrels are expected to make a substantial comeback, Russian crude is viewed as a relatively secure and established supply route. India cannot afford a repeat of the March disruption, and Russian oil is likely to remain a significant part of its supply mix as an insurance policy against future disruptions.