Indian Refiners Diversify Crude Sources Amid Declining Russian Imports

Indian refiners are scaling back their purchases of Russian crude from previously elevated levels as ongoing geopolitical disruptions impact export flows from the country's top supplier. In response, petroleum processors are seeking alternative barrels from regions including West Africa, the Americas, and the Persian Gulf, despite existing restrictions through the Strait of Hormuz linked to the US-Iran conflict.

This shift in procurement patterns coincides with an expected increase in domestic demand as a wave of plant maintenance comes to an end, allowing refiners to boost run rates and increase production. Russia became India’s dominant supplier following the outbreak of the war in Ukraine in 2022, with flows from the OPEC+ producer accounting for over half of India's imports last month.

However, imports of Russian crude are projected to drop to approximately 2 million barrels a day this month, down from a high of about 2.8 million barrels in July, according to data from analytics firm Kpler. Sumit Ritolia, senior manager of modeling at Kpler, noted that the decline reflects normalization following strong buying in recent months, lower export availability from Russia, and increasing competition from China.

Flows from Russia to India are expected to normalize above the 2-million-barrel-a-day mark in the coming months. In the interim, Indian Oil Corp. (IOC), the country's largest refiner, recently issued tenders for supply from the Americas and the Persian Gulf. Additionally, industry peers Hindustan Petroleum Corp. (HPCL) and Mangalore Refinery & Petrochemicals Ltd. (MRPL) made spot purchases of non-Russian crude.

Waves of Ukrainian attacks on Russian refineries and Black Sea ports have caused local fuel shortages and limited Moscow's ability to divert crude into export markets. Over the past four weeks, overseas shipments fell to about 3.5 million barrels a day, down from a high of over 4 million barrels a day in July, based on tanker-movement data compiled by Bloomberg.

India has also faced increased competition with China for discounted barrels. Kpler data indicates that October-loading cargoes of Sokol crude, which ship from Russia’s eastern ports, were purchased unusually early, pointing to stronger forward demand. While India and China typically do not compete for western and eastern Russian oil varieties respectively, a tightening market may alter traditional purchasing dynamics.

"Global supply chain disruptions require businesses and major industrial buyers to maintain agile procurement strategies. For Indian refiners, diversifying crude sources across the Americas, West Africa, and the Persian Gulf is a pragmatic risk-management approach to stabilize supply operations amid ongoing geopolitical uncertainties in Eastern Europe and the Middle East." — Dr. Shishir Gupta, Founder & CEO, StartupLanes