Russia still No. 1 oil source despite decline


New Delhi :Russia remained the top supplier of crude oil to India in July as it exported crude oil worth $3.37 billion during the month, Commerce and Industry Ministry data showed. However, imports from Russia declined by 11.4% in value terms compared to June.

In June, India had imported crude oil worth $3.80 billion. Analysts said the month-on-month decline comes against the backdrop of lower discounts on Russian oil and supply cuts by the country with the OPEC+ decision.

India imported crude oil worth $8.96 billion and Russian supplies were 37.62% of total imports in value terms. Russia has emerged as a major supplier of oil to India over the past 18 months as the country offered concessional oil amid sanctions from the West in retaliation for its invasion of Ukraine.

In FY22, the share of Russian oil in India’s total oil imports was only 2%; In FY23, this was almost one-fourth of the 235.52 million tonnes of crude oil imported by India.

India’s total oil import bill fell by $10.01 billion in June 2023 to $8.96 billion in July, the data showed.

On a year-on-year import basis, Russian oil imports witnessed a rise as imports from the country increased by 42.54% to $2.36 billion in July 2022. For April-July this year, crude oil imports from Russia stood at about $15.74 billion. 127% more than $6.93 billion in the same period last fiscal year.

The rise of Russia as the top oil supplier to India has coincided with OPEC members losing their market share to India.

Iraq, a traditional oil supplier to India, has seen its supplies to India fall by 38.6% year-on-year to $6.9 billion during the April-July period. Saudi Arabia, the world’s second-largest oil producer, sold oil worth $6.90 billion during the first four months of the fiscal year, about 27% less than the same period last fiscal year.

Even on a month-on-month basis, Iraq and Saudi Arabia saw a decline of 6.5% and 5.3%, respectively, as their supplies to India stood at $1.76 billion and $1.41 billion in July.

According to analysts, India and China are among the world’s top oil consumers and the West Asian country would not like to lose these markets. To take advantage of these key Indian markets, Iraq has also offered rebates over the past several months and Saudi Arabia has reduced the Asian premium charged on the oil selling price.

On Thursday, Mint reported that Saudi Arabia has reduced the premium it charges on exports to India after India started sourcing a larger share of its energy requirements from Russia. The Asian premium is an additional amount charged by the Organization of the Petroleum Exporting Countries (OPEC) to Asian countries above the actual selling price. India has repeatedly put pressure on oil producers to eliminate this premium and has also demanded an ‘Asian discount’ in its place. Saudi Arabia has now reduced the premium to $3.5 per barrel from about $10 last year.

Oil prices, which have fallen well off last year’s multi-year highs, have risen over the past three months amid supply cuts by OPEC+ and its key members Russia and Saudi Arabia.

This week Brent crossed $ 95 per barrel. At the time of writing the story, the November contract of Brent on the Intercontinental Exchange was trading at $93.01 per barrel, down 0.56% from the previous close.

The rising prices and reduction in rebates by Russia may impact the refining margins of Indian refineries and oil marketing companies.

Already, in the first quarter of this financial year, gross refining margins (GRM) of OMCs have fallen from the high of the corresponding quarter of FY238. Indian Oil Corporation (IOC)’s GRM stood at $8.34 per barrel in the April-June quarter, compared to $34 per barrel in the same period last fiscal, Petroleum Planning and Analysis Cell data showed.

Similarly, GRM of Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) fell to $12.64 and $7.44 respectively during April-June FY23 from $27.51 and $16.69 per barrel during Q1FY24.

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