Crude oil imports by public refiners such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation rose to a 12-month high in July 2024.
Analysts and trade sources attributed the growth to attractively priced Russian grades compared to some Middle Eastern ones. Tepid demand in China also led to more cargoes being redirected to India.
According to data from energy intelligence firm Vortexa, public sector refiners bought 1.157 million barrels per day (mb/d) crude oil from Russia on a provisional basis in July 2024, the highest since July 2023.
The shipments last month were lower by almost 6 per cent Y-o-Y, but were higher by 8 per cent M-o-M. However, average crude loadings during January-July 2024 by state-controlled refiners fell by more than 9 per cent Y-o-Y to around 1.6 mb/d from 1.73 mb/d a year-ago.
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Russian volumes
Imports by private refiners such as Reliance Industries and Nayara Energy from Russia fell by 10 per cent Y-o-Y to around 653 barrels per day (mb/d) in July 2024. The decline in shipments on a monthly basis was steeper at 25 per cent.
Average loadings during January-July 2024 (666.57 b/d) were also lower, albeit by 5 per cent compared to the same period a year-ago (701.57 b/d).
Imports of Russia’s flagship medium sour grade, Urals, fell by 13 per cent Y-o-Y to around 1.36 mb/d.
“In July, the decline in Russian Urals outweighed the increase in supplies of Russian Far East and Arctic grades, which resulted in a net decline in overall imports of Russian crude into India,” Vortexa’s Head of APAC Analysis, Serena Huang, told businessline.
Imports of ESPO blend rose to 170,000 b/d in July 2024 from 70,000 b/d in June. Similarly, shipments of Varandey rose to 160,000 b/d last month from 141,000 b/d in June 2024.
India’s cumulative crude oil imports fell by over 2 per cent Y-o-Y and 3 per cent M-o-M to 4.48 mb/d in July 2024.
Price arbitrage
On pricing dynamics, Huang said “Russian crude is likely attractively priced compared to Middle Eastern grades, driving higher import appetite from public refiners.”
For instance, Saudi Arabia’s official selling price of its flagship Arab Light grade, similar to Urals, in June 2024 was the highest since February. Prices for July have been fixed lower, likely due to rising non-OPEC crude supplies and gloomy global economic outlook.
“Despite narrowing discounts of Russian crude, it remains a more attractive feedstock compared to Middle Eastern grades from Saudi Arabia and the UAE. The average delivered price of Russian crude into India in May was $84 per barrel, a $3 per barrel and $11 a barrel discount compared to the average UAE and Saudi crude delivered prices, respectively,” Huang explained in a July 16 commentary by Vortexa.
Declining cargoes
On crude oil import momentum, Huang said, “With lower Russian crude exports last month (July 2024), coupled with rising planned maintenance, supplies to India will likely be lower in August and September.”
In the July 16 commentary, Huang pointed out that Russian seaborne crude exports sharply declined in the first two weeks of July, reaching 2.7 mb/d, the lowest since December 2022.
As Russia’s domestic refineries ramp up to meet summer seasonal demand, a decline in exports during this time of year is expected. However, even accounting for seasonality, the country’s crude exports are still down 13 per cent compared to the historical average, she added.
Besides, upcoming refinery maintenance in India will also have a bearing on crude supplies. For instance, BPCL’s Kochi refinery will undergo maintenance during September-October and Bina refinery during August-September 2024.