An oil refinery in Mumbai, India, operated by Bharat Petroleum.
Dhiraj Singh | Bloomberg | Getty Images
Analysts told CNBC that India’s ability to import more Russian oil may have reached its limit, citing infrastructural and political constraints and restrictions on Russian oil flows.
“India will seek to continue importing Russian crude but may have reached its limit, preventing any additional oil imports,” said Janiv Shah, senior analyst at Rystad Energy.
Indian refiners have been snapping up discounted Russian oil since the Kremlin invaded Ukraine last February.
Since then, Moscow has become India’s largest source of crude oil, accounting for About 40% of India’s crude oil imports.
However, Shah told CNBC in an email that the volume of crude oil being consumed and processed by Indian refineries has now reached a “seasonal peak” and will only trend downward from now on.
His views were echoed by commodity intelligence firm Kpler, which highlighted that demand for oil will also fall in addition to refineries currently shut.
“This year, some Indian refineries will be on maintenance for the first time, which is not the case in January-May 2023, when there is no turnaround at all. Everyone is pulling out all the stops,” said Viktor, chief crude oil analyst at Kpler. toner.
Katona added that India’s monsoon season begins in early June, and summer tends to lower demand for oil products due to reduced traffic and construction activity.
India, the world’s third-biggest oil consumer, sees fuel demand typically lull during the four-month monsoon season.India’s total oil demand in June fell 3.7% month-on-month to 19.31 million tons Data from the Indian Petroleum Planning and Analysis Group.
Any additional supply from Russia…flowing into Asia, I doubt that’s done.It’s the maximum amount now
Daniel Hines
Senior Commodity Strategist, ANZ Bank
However, India’s imports of Russian crude still rose month-on-month for the tenth consecutive month in June, data from Kpler showed.
“This is an unprecedented feat in recent history, especially considering that production was 2.2 million barrels per day in June,” Katona said.
According to his forecast, this is the highest volume India will ever import from Russia – at least for the rest of the year.
“I would say 2.2 million barrels per day will be the peak for this year… We believe that India’s imports of Russian crude will drop slightly to 2 million barrels per day. This will be a sustainable level of buying,” he said.
Russian oil flow “limited”?
And the restrictions seem to go both ways.
Daniel Hines, senior commodities strategist at ANZ, said there were “limited constraints” on flows from Russia.
“Any extra supply from Russia … going into Asia, I doubt that’s done. It’s the maximum volume now,” he added.
Russian oil exports fell by 600,000 bpd to 7.3 million bpd in June, the lowest level since March 2021, according to Rosstat. The latest report from the International Energy Agency.
Technically India could buy more, but they don’t want to antagonize the Middle East too much.
Victor Katona
Chief Crude Oil Analyst at Kpler
Russia also pledged to cut crude oil exports in early July.
“India has talked about not being able to really receive a lot of additional cargo from Russia,” Hines added.
However, Kpler’s Katona said that’s not to say Indian refiners won’t try to import Russian oil again next year, hitting record highs.
“The March-May period is most likely to happen again,” he said, noting that demand at that time would be “unconstrained by the Indian side, and the resumption of refineries will again boost Russian export supplies.”
Political Issues: India and the Middle East
However, India also needs to maintain relationships with other exporters, especially key suppliers in the Middle East.
Rystad data showed that 55% of India’s recent seaborne acid imports came from Russia, while imports from the Middle East fell to a “historically low 40%”.
“India’s reliance on Russian crude may be nearing its limit as it still needs to secure long-term supply deals with Middle Eastern suppliers,” Shah said.
Crude imports from the Middle East fell 21.7% in June from the beginning of the year to 8.68 tonnes, Refinitiv data showed.
Supply of medium sour crude to India tends to be in annual contracts with minimum purchase agreements.
“Technically, the Indians might buy more, but they don’t want to antagonize the Middle East too much,” said Keppler’s Katona. “Politics matter too,” he said.
However, Indian buyers are particularly price-sensitive and may still forego crude from other countries in favor of Russian crude at the right price.
“If the price gap widens, Indian refiners can always buy more Russian crude at the expense of other grades, such as Middle East crude,” said Yaw Yan Chong, director of Asia oil research at Refinitiv.
Since February last year, Russian exports to India have soared more than 10 times, from an average of 350,000 tons per month before the invasion to an average of 4.57 million tons per month after the invasion, from March 2023, he said. rise.
Yaw expects India to continue to import Russian products at high levels “as long as Russia (crude oil) is (sanctioned) and shunned by its traditional European buyers”.