Russia oil imports set to drop by half in December to 1 mn bpd amid fall in fresh orders
India's crude oil imports from Russia are projected to drop sharply by nearly 47% in December.
New Delhi: With sanctions on Rosneft and Lukoil in place since 21 November, import of Russian oil by India is expected to drop by about 47% to around 1 million barrels per day, said sector experts.
Data from global ship tracking firm Kpler said so far in November (as of 27 November) imports from Russia were 1.9 million barrels per day. Oil supplies from Russia to India have averaged around 1.6-1.8 million barrels per day in the past few years.
The drop in imports from Russia is expected to bring about a shift in India's energy import basket, as Russia has been the top supplier of oil to India since FY23, following the West's restrictions on the purchase of Russian oil and suppliers' offers of deep discounts.
"Looking ahead, we’ve started to see a clear dip in Russia’s exports to India since the OFAC (Office of Foreign Assets Control) sanctions announced on 23 October. Based on current loadings and voyage activity, we expect December arrivals to be in the range of 1.0 mbpd," said Sumit Ritolia, lead research analyst, refining and modelling at Kpler, a data and analytics provider for global commodity markets. In the short term, imports from Russia would ease to around 800,000 barrels per day before stabilizing to around that level, he said.
The sanctions on two of the largest Russian suppliers, which accounted for approximately 60% of Russia's total oil exports to India, were announced on 23 October and took effect on 21 November.
Drop in imports
Prashant Vashisht, senior vice president and co-group head, Corporate Ratings, Icra Ltd, said: "With sanctions on Rosneft and Lukoil, it is expected that about 1.1 million barrels per day of supplies from Russia would be out of the Indian market, and about 700,000 barrels per day would come in.
- Russian oil imports to India are projected to fall by nearly 47% in December, reaching about 1 million bpd, down from 1.9 million bpd in November.
- The drop is primarily due to the US OFAC sanctions on major suppliers Rosneft and LUKOIL, which became effective on 21 November.
- Indian refiners are aggressively diversifying supply, increasing intake from West Asia, West Africa, and the Americas to replace the sanctioned Russian volumes.
- Russian discounts have increased to about $6 per barrel, which is expected to partially cushion Indian refiners against the higher cost of procuring oil from alternative, non-discounted sources.
- Non-sanctioned Russian entities are employing "adaptive" logistics, including ship-to-ship transfers and mid-voyage diversions, to maintain some supply to India, indicating a move towards more complex and less transparent routes.
That would significantly bring down the Russian supplies' share below the 35-36% annual share in the import basket as witnessed in the last fiscal." In FY25, India imported 88 million tonnes of oil from Russia, according to data from the Union ministry of commerce and industry.
Kpler’s Ritolia added that refiners are already adjusting for the medium term and are shifting towards non-designated Russian entities, as well as increasing sourcing from West Asia, West Africa, and North and Latin America. He noted that to compensate for softer near-term Russian arrivals, Indian refiners are expected to increase intake from a broader mix of suppliers such as Saudi Arabia, Iraq, UAE, Kuwait, Brazil, Argentina, Colombia, Guyana, US, Canada and West Africa.
Imports from Russia have been the highest in five months so far in November. However, the lack of fresh orders from 21 November would result in a decline in crude arrivals next month.
The second largest supplier according to data from Kpler was Iraq with supplies at 996,000 barrels per day, followed by Saudi Arabia (657,000 bpd), US (496,000 bpd) and UAE (221,000 bpd).
Highlighting efforts by other non-sanctioned entities to supply to India, Ritolia said: "On the Russian side, the response has been highly adaptive, involving STS (ship-to-ship) transfers near Mumbai, mid-voyage diversions, and more complex logistics to keep barrels moving and increase discounts. As long as broader secondary sanctions aren’t applied, India is likely to continue importing Russian crude—just through more indirect and less transparent routes."
Discount cushion
Mint earlier reported that discounts offered by Russian suppliers have increased to about $6 per barrel in less than a month as buyers shun oil from sanctioned entities Rosneft and Lukoil, from nearly $4 in October. Several global buyers avoided Russia after its invasion of Ukraine in 2022, prompting Moscow to offer discounts close to $30 per barrel.
Icra’s Vashisht also noted that high discounts from Russian suppliers are likely to somewhat cushion the cost of diversifying to other oil sources, including those from US and West Asia.
"Although imports would decline, the amount of discount is high by Russian suppliers and whatever cheaper oil is coming from there may offset the increase in cost for moving towards other sources of oil. Further, oil marketing companies (OMC) already have robust gross marketing margins due to low oil prices and stable retail prices. So, profitability may go up going ahead," Vashisht added.
On diversification by Indian refineries, Kpler’s Ritolia was of the view that Indian refiners are complex and replacing Russian volumes would not have any technical impact, while it may reduce margins for some refiners.
The high overall imports in November from Russia can be attributed to increased imports before the 21 November deadline. According to Ritolia, some of the key factors include "front-loaded arrivals ahead of the 21 November deadline, with refiners accelerating scheduling and speeding up vessel turnarounds, particularly for Rosneft- and Lukoil-linked cargoes; high domestic fuel demand and strong refinery runs during Q4, when Russian barrels remained the most economical incremental feedstock".
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