India is unlikely to cut back on its crude oil sourcing from Russia under the Trump administration owing to the healthy price arbitrage of procuring barrels from the erstwhile Soviet Union.
“India is unlikely to trim its purchases of Russian crude under a new Donald Trump government, though it might explore more term import contracts and collaboration on storage with the US,” S&P Global Commodity Insights.
Russia accounts for roughly 38-40 per cent of India’s cumulative crude oil imports.
The South Asian country, which imports as much as 85 per cent of its needs, has pledged to continue buying oil from the cheapest available sources to meet its growing demand, and Russian oil falls in that category due to attractive discounts, S&P added.
“India has been taking a stand to buy cheaper crude wherever available, and I don’t foresee the US offering their typical crude priced lower than Russian oil. Hence a drastic shift is less likely,” said Abhishek Ranjan, South Asia oil research lead at S&P Global Commodity Insights.
The average discount of Russian Urals to Dated Brent was $12.129 per barrel in August, $12.30 in September and $12.189 in October, fluctuating within a narrow range, according to Platts, which is part of S&P Global Commodity Insights.
“A few years ago, India held discussions with the US to cooperate on emergency crude oil reserves, which included the possibility of buying and storing US oil in US strategic petroleum reserves, and shipping it to India, when necessary, but that plan has not moved forward,” S&P projected.
US exports to India
S&P Global Commodity Insights pointed out that the share of the US in India’s crude oil imports have been declining.
In January-September 2024, India’s imports of Russian crude averaged 1.7 million barrels per day (mb/d), making the non-OPEC producer the country’s biggest supplier.
The US was the fifth-largest supplier, accounting for 215,000 barrels per day (b/d) in the same nine-month period, according to data from S&P Global Commodities at Sea (CAS).
The US crude share in India rose to as high as 15 per cent in the first quarter of 2021. The majority of US crude exports to India consisted of light grades, predominantly WTI, with nearly 50 per cent previously discharged for Reliance Industries until 2021.
However, since the start of the Russia-Ukraine conflict, purchases from the US have fallen behind, as Russian crude now accounts for over 40 per cent of India’s imports, according to data from CAS.
Commodity Insights expects the US share of India’s total crude imports to maintain a range of 5-6 per cent in the near term, as US crude has solidified its presence in Europe.
The recent availability of cheap Russian crude has shifted the dynamics away from the US grades. Notably, the Reliance refinery, along with many other Indian refineries, possesses a high complexity index, allowing a relatively easy transition between these crude grades. As a result, the shift from US grades to Russian grades was relatively easy, Ranjan said.
“However, India may revert back to increasing its imports from the US, should sanctions on Russian crude tighten or the price dynamics favour US crudes, although this appears less likely in our base case,” he added.
Commodity Insights expects Platts Dated Brent to average $81 per barrel in 2024, but the market remains volatile at present.
Despite ongoing tensions in the Middle East and other uncertainties, Commodity Insights sees an easing of Platts Dated Brent to the lower $70 b/d in 2025, owing to expected production increases from both OPEC+ and non-OPEC+, coupled with a subdued global oil demand growth.