With discounts on Russian crude oil shrinking, Moscow’s share in India’s oil imports declined to an eight-month low in October, while New Delhi’s traditional West Asian suppliers — Iraq, Saudi Arabia and the United Arab Emirates (UAE) — managed to claw back part of the market share they had ceded to Russia.
According to an analysis of India’s official trade data by The Indian Express, Russia’s share in India’s oil imports (by volume) in October was 31.9 per cent, down from 34.8 per cent in September. It declined for four consecutive months from the peak of 44.7 per cent registered in June.
On the other hand, the combined share of Iraq, Saudi Arabia and the UAE touched a seven-month high of 44.1 per cent in October, having risen consistently month-over-month since June. Higher supply of crude from these three countries over the past few months has been leading the recovery in the share of the Organization of the Petroleum Exporting Countries (OPEC) in India’s oil imports.
ADVERTISEMENT
Also Read | India’s Russian crude imports prevented price surge, ‘havoc’ in global oil market, says petroleum ministry
In October, OPEC’s share in India’s oil import volumes was 50.2 per cent, up from 49.1 per cent in September. In April 2022, when Russian oil deliveries to India were starting to rise notably, the international oil suppliers’ cartel accounted for a 71.3 per cent share, led by Iraq, Saudi Arabia and the UAE, which together had a share of nearly 61 per cent in New Delhi’s oil imports. Apart from these three countries, OPEC has 10 other member nations.
The government releases country-wise and commodity-wise trade data with a lag; the data till October is available so far.
While the price of crude oil depends on grades and can vary substantially, the average landed price of crude and import volumes from the supplying countries were used for computations as the government does not release grade-wise oil import data.
Prior to the war in Ukraine, Iraq was India’s top source of crude, followed by Saudi Arabia and the UAE, while Russia was a marginal player. However, as the West began shunning Russian oil following Moscow’s February 2022 invasion of Ukraine, Russia started offering deep discounts to willing buyers. Indian refiners started lapping up the discounted barrels, catapulting Russia to the top spot on the list of India’s oil suppliers. Iraq, Saudi Arabia and the UAE have each slipped a rank on the list.
ADVERTISEMENT
Also Read | Cheaper Russian oil helped Indian refiners save $3.3 billion in first half of FY24, data shows
Over the past few months, industry insiders have been saying that the discounts on Russian oil have eroded significantly due to a number of factors, including high oil price volatility, high and opaque shipping and insurance charges, competition from Chinese refiners, export cuts by Russia and the country’s own domestic demand for petroleum products, the evidently loose enforcement of the West’s price cap on Russian oil and Moscow finding ways to bypass the restrictions.
According to The Indian Express’s analysis of trade data, the discount on the delivered price – including freight and insurance – of Russian crude with respect to the average delivered price of oil from Iraq, Saudi Arabia and the UAE was just 5.7 per cent in October, after falling for four consecutive months from June’s peak level of 22.7 per cent. Similarly, the discount on Russian oil with respect to the average price of oil received from all OPEC suppliers fell for four consecutive months to 6.9 per cent in October from 23.1 per cent in June.
Even as the discounts on Russian oil vis-à-vis other major suppliers have visibly shrunk, for India, which depends on imports to meet over 85 per cent of its oil requirement, even lower concessions matter as they help the country save billions of dollars in foreign exchange.
ADVERTISEMENT
As reported earlier by The Indian Express, Indian refiners are estimated to have saved around $3.3 billion in the first half of the current financial year (FY24) through purchase of discounted Russian crude oil, according to computations based on trade data. For April-November, the savings are estimated to have risen to $3.55 billion.
Since Indian refiners started ramping up Russian oil imports, the actual discount levels remain shrouded in mystery, due to the opaque pricing of Russian oil cargoes. Unlike oil from most other suppliers, Russian crude is being bought by Indian refiners on a delivered basis, which means the price of the cargoes includes cost of freight and insurance, apart from the cost of oil itself. Therefore, the best available marker for discounts is a comparison between the average landed price of Russian crude and the average price of oil imported from other suppliers.