Russia stays India's top crude supplier with 1.64 million barrels shipped daily in March

Russia has become a major source of crude oil to India ever since Moscow sent troops into Ukraine in February 2022. The Eurasian country has been diverting its oil to Asian countries especially India and China at discounted rates as the European Union (EU) and the US imposed a slew of sanctions on Moscow after the war between Russia and Ukraine broke out.

Compared to 1.64 million bpd in March 2023, Russia supplied only 68,600 bpd of crude oil to India in the same period last year.

OPEC supply cut

In a surprise move, the Organisation of Petroleum Exporting Countries and its allies, commonly known as OPEC+, announced supply cuts of around 1.16 million bpd earlier in the month, leading to an uptick in crude oil prices.

Russia, along with Saudi Arabia and Iraq, announced supply cuts starting from May 2023 till the end of the year. Saudi Arabia has decided to reduce supply by 500,000 bpd while Iraq will cut supply by over 200,000 bpd. Russia, which also comes under OPEC+, said it will maintain the production cut of 500,000 bpd till the end of 2023.

Crude oil prices, which had hit a low of $72 per barrel in mid-March due to the collapse of global banks and lackluster demand, are again expected to trend upwards on account of the lower output.

"The decision by OPEC+ to announce additional production cuts of around 1.16 million barrels per day has resulted in a surge in crude oil prices. This could potentially add inflationary pressures on the economy. Since imports contribute to around 85 percent of the total demand in India, the increase in crude prices raises the import bill and weakens the rupee against the US dollar,” said Prashant Vasisht, vice president and co-head, corporate ratings, ICRA.

International crude oil prices play a significant role in India’s economy as the country is a net importer of crude oil and is dependent on imports for 85 percent of its oil needs.