Key facts
- India imported 2.08 million b/d of Russian crude in August, down from 2.8 million b/d in July.
- Overall crude imports for India declined to 4.7 million b/d in August.
- Seaborne Russian crude exports fell to 3.7 million b/d in August from 4.1 million b/d in July.
- Shipments from Russia's Novorossiysk port to India dropped significantly due to security concerns and freight economics.
- China's crude imports from Russia rose to 1.7 million b/d in August.
- The UAE remained India's second-largest crude supplier in August, with shipments increasing to 520,000 b/d.
India's crude oil imports from Russia saw a significant decline in August, a trend that cannot be solely attributed to seasonal refinery maintenance. While refiners have postponed scheduled work due to strong margins on refined products and resilient demand, the more substantial factor is Russia's reduced overall crude exports and increased competition from China for available cargoes.
In August, India imported 2.08 million barrels per day (b/d) of Russian crude, a decrease from 2.8 million b/d in July, returning to May levels. Overall crude imports also fell to 4.7 million b/d from 5.05 million b/d. Despite this dip, the August total remained the highest for that month in five years. Refiners have largely deferred maintenance, with BPCL's Mumbai refinery moving planned work to November and only partial maintenance expected at CPCL's Manali refinery. MRPL is also shutting a CDU for four weeks. Domestic consumption of diesel and petrol in July was approximately 10% higher than the previous year, and August demand is also expected to remain strong, partly due to below-average monsoon rainfall impacting road activity.
The primary constraint appears to be Russian supply. Total seaborne Russian crude exports decreased to 3.7 million b/d in August from 4.1 million b/d in July, with the decline concentrated at the Black Sea port of Novorossiysk. This port is a key departure point for Russian crude to India, and shipments from there dropped to 616,000 b/d from 800,000 b/d in July. Security concerns, including Ukrainian drone attacks in the Black Sea affecting various terminals and pipelines, are a significant factor. Freight economics also play a role, with transportation from Novorossiysk to India costing approximately $20 million per Suezmax cargo, compared to about $13 million from Baltic Sea ports. However, voyages from the Baltic Sea carry risks of detention or seizure by European countries.
Russian exporters are increasingly utilizing the Northern Sea Route, making China a more cost-competitive destination. China's crude purchases rose to 7.4 million b/d in August, with its Russian imports increasing to 1.7 million b/d from 1.4 million b/d in July. This shift means more Urals cargoes are heading to China instead of India. Further intensifying competition, Russia is prioritizing domestic refining due to fuel shortages following Ukrainian drone strikes on its plants, leaving less crude available for export. Additionally, Iran's reduced floating storage near Asian coasts, due to US Navy blockades, is compelling Chinese buyers to pursue Russian barrels more aggressively.
In response, India is diversifying its crude sources. The UAE remained its second-largest supplier in August, with shipments increasing to 520,000 b/d. Saudi Arabian flows to India decreased to 350,000 b/d, partly due to disruptions in the Bab el-Mandeb Strait. Iraq and Kuwait have gradually re-entered the market, supplying 165,000 b/d and 90,000 b/d respectively in August. Producers like Brazil and Venezuela also contributed, supplying a combined 450,000 b/d.
September is anticipated to be challenging for crude buyers, with high Asian fuel margins and continued instability in Middle Eastern maritime chokepoints. Russian crude is now trading at parity with dated Brent, indicating a scarcity of cheaper alternatives. The August decline in Indian imports may signal the beginning of a problematic autumn for oil markets.