India’s crude oil imports from its traditional source, Saudi Arabia, inched up to a four month high in February 2024 at more than 8,33,590 barrels per day (b/d).
It was aided by softening prices of Saudi Arabia’s flagship grade, Arab Light and declining number of vessels ferrying Russian crude oil due to tightening sanctions by the US and Western countries.
According to Vortexa, Saudi Arabian crude oil exports to India rose by 28 per cent year-on-year (y-o-y) and 21 per cent month-on-month (m-o-m) last month. In fact, crude oil imports to India from the Arabian nation were the fourth highest in FY24, ending March.
Overall, India’s crude oil imports fell 3 per cent y-o-y and 8 per cent m-o-m to 4.46 million barrels per day (mb/d) in February as Asia’s second largest crude oil importer sourced lesser volumes from Iraq, the UAE, the US and Kuwait.
Saudis get competitive
Vortexa’s Head of APAC Analysis, Serena Huang told businessline “Saudi crude’s heavy official selling price (OSP) discounts is likely a strong reason for driving India’s imports of Saudi crude in February.”
For February 2024, Saudi Arabia slashed rates by fixing the Arab Light price for Asia at $1.50 a barrel over Oman/Dubai, the lowest since November 2021. In January, the world’s top crude oil exporter set the price at $2 per barrel over Oman/ Dubai. For March 2024, it has kept prices unchanged from February.
“With Saudis getting aggressive, keeping the OSP unchanged for March, and supply woes with Russia continuing, Middle Eastern grades are likely to continue to get support from Indian refiners. Also, Saudis are becoming competitive to counter Atlantic Basin cargoes,” trade sources said.
On the other hand, crude oil imports from Iraq fell 34 per cent m-o-m and 23 per cent y-o-y to 7,85,586 b/d in February 2024, the lowest since October 2023. Vortexa data shows that during November 2023 to January 2024, Iraqi exports averaged at over 1 mb/d.
Trade sources said that some barrels imported from Iraq during November 2023-January 2024 could be term contracts, adding to the overall numbers. Besides, India turned to Iraq as the price of its flagship grade Basrah Medium was lower compared to Saudis, averaging between $76-82 a barrel.
Currently, Arab Light is trading at $82.66 a barrel, while Basrah Medium is at $80.22.
“India’s imports of Middle Eastern crude were down m-o-m in February, but this could reverse if availability of non-sanctioned tankers to move Russian crude starts becoming a constraint,” Huang explained.
Russian imports
Crude oil imports from Russia rose by 9 per cent m-o-m to 1.42 mb/d. However, cargoes on an annual basis declined by more than 12 per cent last month.
The annual decline is largely attributed to issues in contacting vessels to transport the critical commodity as the US and Western sanctions tighten making it difficult for European shippers, particularly Greek vessels, to transport the commodity.
When asked about the impact on sanctions and drone attacks on Russian refineries, Huang said “We are seeing a lack of buying interest in Sokol crude from Indian refiners in recent months. More EU vessel operators are also leaving the Russian Urals trade, tightening the tonnage supply. Russian crude exporters could be working out alternative logistics arrangements to circumvent the tighter tonnage supply, but the outcome remains to be seen.”
Vortexa’s Freight Analyst Mary Melton in a February 29 commentary said a “fundamental shift” is being observed in the size and profile of the fleet trading Urals, which points to increasing likelihood of fleet constraints and a higher degree of segregation between Russian-traded and mainstream fleet.
“The change in fleet composition plus the overall fleet shrinking points to increasing constraints on fleet capacity, especially as India has recently indicated an unwillingness to accept cargoes from sanctioned tankers,” she added.