India turns to UAE for crude oil amid lower Russian discounts, production cuts

India’s crude oil imports from United Arab Emirates (UAE) have increased sharply in the recent months

India’s crude oil imports from the United Arab Emirates (UAE) have increased sharply in recent months amid narrowing discounts on Russian crude oil supply and production cuts from Saudi Arabia.

In November, India imported 303,000 barrels per day (bpd) of crude oil from UAE — an increase of 35.26 percent from the previous month, according to data from energy cargo tracker Vortexa. Similarly, India’s crude imports from UAE in October increased 61 percent from September, at 224,000 bpd.

The increase in crude imports from UAE in recent months comes as Indian refiners are facing payment-related issues on buying Russian oil and are therefore looking back at traditional Middle-East suppliers.

“With the US enforcing stricter surveillance in terms of a fleet of shipping companies which are trying to ship Russian oil to India and other markets, it has become difficult for Indian refiners to procure Russian oil. As a result, they (Indian refiners) are shifting to other producers from OPEC,” said Hitesh Jain, Lead Analyst, Yes Securities.

“Despite the (supply) curtailment from OPEC, UAE is one of the countries which is keeping its output high. If you look at the trend before the Ukraine-Russia war, India used to import a huge quantum of oil from Iraq, UAE and Saudi Arabia. Going forward, countries such as UAE and Iraq are ideal for India and import from these countries should go up,” Jain added.

Also red: Crude oil prices edge lower as fresh voluntary cuts by OPEC+ disappoint traders

In December, the Organization of Petroleum Exporting Countries and their allies (OPEC+) voluntarily agreed on a fresh production cut of nearly 1 million bpd by early 2024, taking the total reduction above 2.2 million bpd or about 2 percent of the world supply, to support crude prices.

However, UAE, which is also an OPEC member, has been boosting its production capacity.

“UAE is increasing its production capacities as the country has been looking at increasing its crude oil sales. This could be the major reason for higher imports from the UAE. However, I do not believe that UAE is looking at giving additional discounts,” said Prashant Vasisht, VP & Co-Head, Corporate Ratings, ICRA.

In November, India’s imports of crude oil from Iraq also increased sharply to 1.03 million bpd, compared to 786,000 bpd in the previous month, constituting 23 percent of the country’s total oil imports in the month.

ALSO READ: Oil heads for seven week decline for first time in five years

Prior to the war between Russia and Ukraine in 2022, top suppliers of crude oil to India included the Middle-Eastern countries of Iraq, Saudi Arabia and UAE. However, Russia, which used to supply only around 0.2 percent of India’s total oil requirement, emerged as the largest supplier to the country after the war.

The Eurasian country diverted its oil to Asian countries, especially India and China, at discounted rates ever since the European Union (EU) and the US imposed a slew of sanctions on Moscow after the invasion of Ukraine. Since then, Russia has become a major source of crude oil for India and has overtaken Saudi Arabia and Iraq to become the biggest supplier of the commodity.

However, amid declining discounts from Moscow, the cost of Russian oil is surpassing the price cap, and therefore India’s oil imports from the country are tanking. India’s crude oil imports from Russia fell for the second consecutive month in November declining 4 percent from last month.