India’s dependence on Russian oil might be ‘approaching a limitation’

India’s capability to import more Russian oil might have struck a limitation for the remainder of the year, experts inform CNBC, mentioning infrastructural and political restrictions, in addition to restrictions to Russian oil streams.

“India will look to continue Russian crude imports, but perhaps it has reached its limit, hampering any additional barrels,” according to Janiv Shah, senior expert at Rystad Energy.

Since the Kremlin’s intrusion of Ukraine in February in 2015, India’s refiners have actually been getting marked down Russian oil.

Moscow has actually because leapfrogged to end up being India’s leading source of petroleum, representing about 40% of India’s crude imports. June marked the 10 th successive month-on-month boost in India’s imports of Russian crude, information from product intelligence company Kpler revealed.

“An unprecedented feat in recent history, especially given the volumes in question — 2.2 million barrels per day in June,” Kpler’s lead unrefined expert, Viktor Katona stated.

And that’s the greatest volume that India’s imports of Russian oil can go– a minimum of for the remainder of the year, according to his forecasts.

“I would say 2.2 million b/d will be the peak this year … We believe India’s imports of Russian crude will see a slight downward correction to two million barrels per day. That will be the sustainable level of buying,” he stated.

However, the volume of petroleum taken in and processed by India’s refineries has actually now struck a “seasonal peak” and would just trend downwards from here, Rystad Energy’s Shah informed CNBC in an e-mail.

His beliefs were echoed by Katona, which highlighted that in addition to refineries being presently shut, need for oil is set to drip down too.

“For the first time this year, some of Indian refiners will be undergoing maintenance which was just not the case in January to May 2023 when there were no turnarounds at all. Everyone was firing on all cylinders,” stated Katona.

India’s monsoon season began in early June, and the summer season duration is frequently related to lower need for oil items as an outcome of lower movement and building and construction, Katona included.

Fuel need in India, the world’s 3rd biggest oil customer, generally goes into a lull throughout the four-month monsoon season. India’s overall oil need in June slipped 3.7% month-on-month to 19.31 million tonnes, according to information from India’s Petroleum Planning and Analysis Cell.

And it appears the limitation goes both methods.

Flows coming out of Russia have a “finite limit,” stated Daniel Hynes, senior product strategist at ANZ.

“Any additional supply coming out of Russia … that flows into Asia, I suspect it’s done. It’s maximum amount now,” he included.

Russian oil exports fell 600,000 barrels daily to 7.3 million barrels daily in June– the most affordable because March 2021, according to a current report by the International Energy Agency.

Russia likewise vowed to cut its petroleum exports previously in July.

“India has talked about the inability to really pick up significantly additional cargoes from Russia,” Hynes included.

However, that’s not to state that India’s refiners will not try to pursue another all-time high import of Russian oil next year, stated Kpler’s Katona.

“Most probably in the March-to-May period again,” he stated, explaining that need at that time will be “unrestricted from the Indian side and Russian export availability will be once again boosted by refinery turnarounds.”

However, India requires to keep its relationship with other exporters too, specifically essential providers in the Middle East.

According to Rystad information, 55% of India’s current seaborne medium sour imports were from Russia, while imports from the Middle East sank to a “historic low of 40%.”

“India may be approaching a limit in its reliance on Russian crude, as it would still need to secure long-term supply agreements with Middle Eastern suppliers,” Shah stated.

Crude import from the Middle East area dropped 21.7% to 8.68 kilo tonnes in June compared to the start of the year, information from Refinitiv revealed.

Medium sour unrefined materials to India tend to come under yearly term agreements, which have minimum purchase arrangements.

“Technically, the Indians could be buying more, but they don’t want to antagonize the Middle East too much,” stated Kpler’sKatona “Politics matter, too,” he stated.

However, Indian purchasers are especially price-sensitive, and might still abandon other nations’ crude for Russia’s at the ideal rate.

“Indian refiners can constantly take more Russian [crude] at the cost of other grades, e.g the Middle Eastern ones, if the rate variation expands,” stated director of Refinitiv Oil Research in Asia, Yaw Yan Chong.

Russian exports to India have actually skyrocketed more than 10 times because February in 2015, shooting from a pre-invasion average of simply 350,000 metric tonne each month to a post-invasion average of 4.57 million metric tonne each month from March 2023 onwards, he stated.

Yaw anticipates India will still pursue Russian imports at raised levels “for as long as Russian [crude] are under [sanction] and avoided by their conventional European purchasers.”