India ramps up crude oil supply from Russia in the last two months; Iraq, Saudi lag behind

Russia has become the biggest supplier of crude oil to India.

In CY24, India has sourced the maximum crude oil from Russia in the last two months, while supplies from its traditional suppliers Iraq and Saudi Arabia have depleted to the lowest level in the same period, according to energy cargo tracker Vortexa.

In June, at 1.93 million barrels per day (bpd), Indian imports of crude oil from Russia were the highest, while in July it was 1.81 million bpd. The rise in Russian oil supply to India comes despite narrowing discounts from the country.

Russia has become the biggest supplier of crude to India since war broke out between Ukraine and Moscow in 2022. The country has been providing crude at discounted rates to India after the West imposed sanctions on it. However, in recent months, the discounts have reduced as more countries are accepting Russian oil.

Meanwhile, imports from Saudi Arabia and Iraq slumped to their lowest this year in June and July 2024. In June, Saudi Arabia supplied 4,54,000 bpd of crude to India, while in July it supplied 6,06,000 bpd. From Iraq, India imported 8,01,000 bpd in June and 6,03,000 bpd in July.

“Even if we get only a few dollars worth of discount on Russian crude, it is still attractive to Indian refiners. Right now, GRMs (gross refining margins) have come down globally, so it makes economic sense for refiners to keep buying Russian crude even when discounts have gone down,” said Prashant Vasisht, VP and Co-Head, Corporate Ratings, ICRA.

During the first quarter of financial year 2024-25, refining margins of the state-run oil marketing companies (OMCs) declined significantly, dragging down their net profits. The combined consolidated net profit of the three state-owned OMCs — Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL)—slumped 77 percent to Rs 7,371 crore, compared to Rs 32,051 crore in the same period last year.

Following the results, HPCL said the reduction in its GRMs was primarily due to lower crack spreads— the price difference between a barrel of crude oil and a barrel of a petroleum product (e.g., petrol)— in line with the trend in international crack prices.

IOCL said its average GRM fell to $6.39 a barrel against $8.34 in the year-ago period, while BPCL’s GRM dropped to $7.86 per barrel from $12.64 per barrel last year. HPCL’s GRM declined to $5.03 per barrel, compared with $7.44 per barrel in FY24.

Crude deal with Russia

Amid narrowing discounts from Russia, which has become the largest supplier of crude oil to India since 2022, the OMCs are looking at securing long-term deals with Moscow.

Minister of Petroleum and Natural Gas Hardeep Singh Puri had said earlier that since India is the second biggest consumer of oil, the country has the power to negotiate a favourable deal with Russia.

A long-term contract with Russia at a discounted price becomes important for India as the country’s imports have climbed to around 87 percent of its oil requirement. This is likely to  increase next year as the country’s energy demand is expanding while domestic production remains steady.