News
Russia turns India’s biggest crude supplier by volumes
Summary
Saudi Arabia, United Arab Emirates and the US completed the list of the top five suppliers with exports of 39.37 mt, 21.50 mt and 15.16 mt to India during the financial year ended 31 March.New Delhi: Russia emerged as the largest exporter of oil to India in the last financial year with 50.84 million tonnes of crude supplies, according to data from the commerce and industry ministry, amid western sanctions on Russian oil purchases following its invasion of Ukraine.
However, due to the $60-per-barrel price cap imposed by the US and its allies, Russia was pipped by Iraq on the value of imports. Russia came second at $31.02 billion, while Iraq supplied 50.31 million tonnes for $33.37 billion.
Saudi Arabia, United Arab Emirates and the US completed the list of the top five suppliers with exports of 39.37 mt, 21.50 mt and 15.16 mt to India during the financial year ended 31 March.
In value terms, supplies from Saudi Arabia, the UAE and the US were worth $29.04 billion, $16.41 billion and $10.18 billion.
Russia surged to the top of the table as a major oil supplier to India in just a year on the back of the discounted oil it was forced to offer. In FY22, Russian oil accounted for only 2% of India’s total oil imports; in FY23, it made up around one-fourth of the 235.52 million tonnes of crude oil imported by India.
Total oil imports rose by nearly 11% from 212.28 mt in the previous fiscal.
The price of crude oil was volatile throughout the last financial year on account of the Ukraine war, ranging from $75 to as high as $130 per barrel. The increase in the share of Russian supplies came at the expense of a decline in Iraq’s share, which has been traditionally the largest supplier to India, followed by Saudi Arabia.
A recent report by the Bank of Baroda showed that the average price of procurement ranged from $615 per tonne from Russia to $790 per tonne from Nigeria. The overall savings on account of the increase in the share of cheap Russian oil was the equivalent of around $5 billion, the ministry said.
However, although Russian oil accounted for a significant part of India’s total crude import basket, the lower cost of imports is yet to be reflected in the basket. The basket comprises sour grade (Oman and Dubai average) and sweet grade (Brent Dated) of crude oil processed in India, refined in the ratio of 75.62 : 24.38. It does not comprise Russian crude.
Union minister for petroleum and natural gas Hardeep Singh Puri recently said the Indian crude basket price is likely to factor in the cheaper Russian imports going ahead. The crude basket currently stands at $75.06 per barrel.
According to market experts, the cost of imports as per the India crude basket would be much lower if the price of cheaper imports from Russia is accounted.
The crude basket is a key reference for policy matters and gas prices. Under the new gas price norms, the domestic natural gas price for a particular month is calculated at 10% of the Indian crude basket price of the previous month.
India imports around 85% of its total energy requirement and amid the volatile market scenario last fiscal due to the Russia-Ukraine war, India tried to diversify the sources of energy imports and looked for cheaper purchases.
However, with the Organization of the Petroleum Exporting Countries and its allies including Russia (Opec+) continuing with their output cuts, the international prices may rise. This may lead to Russia pushing for and increase in the price for its oil exports going forward.
Last month, union finance minister Nirmala Sitharaman said India may buy Russian crude oil near or above the price cap imposed by the G7 if necessary.
