Indian refiners lifted more oil from Saudi Arabia than Russia in July

For the first time since March, Indian oil refiners have lifted more oil from Saudi Arabia after Russian crude prices shot up in July.

Trade and industry data, published by Reuters on Wednesday, reveals that India’s oil supplies from Saudi Arabia rebounded for the first time in five months.

India, the world's third-largest importer of oil, decided to buy from Russia driven by Moscow's decision to steeply undercut international prices for commodities it is banned from selling to the West. As India's inflation remained above 7%, the deep discounts by Russia did offer some much needed relief.

As per Bloomberg, Russian barrels were cheaper than Saudi crude from April through June, with the discount widening to almost US $19 a barrel in May.

However, as prices of Russian supplies began climbing on robust demand, Indian refiners lifted more term supplies from Saudi Arabia in July. Data shows that India imported 8,77,400 barrels a day (BPD) of oil from Russia in July, a decline of about 7.3% from June. Russia, the second-biggest oil supplier after Iraq, increased the production of its oil slightly in July.

Traditionally, India imports over 80% of its crude oil requirements. Till February 2022, it imported 193.5 million tons of crude oil at a cost of US $105.8 billion.

India’s crude oil needs are met largely by the Middle East and the US. In the whole of 2021, India imported just 12 million barrels of oil, making up a mere 2% from Russia. At 28.4 million tons, India produces more oil domestically as per figures released in May 2022.

The information available through oil companies indicates that India shipped 3.2% less oil in July at 4.63 million BPD compared to June as some refineries planned maintenance turnaround from August.

After the Saudi oil producers lowered the official selling price (OSP) in June and July, India’s oil imports rose by 25.6% to 8,24,700 BPD in the month, the highest in three months. Saudi Arabia remains India's third top supplier.

“I think we should wait and watch as the situation plays out. By December 2022, Europe will stop the 2 million BPD imports from Russia. Both India and China have marked a peak in imports. How the trend evolves will be interesting to watch,” a Mumbai-based trade analyst said.

In FY 2020-21, India imported 85% of its crude oil requirements and 54% of its natural gas requirements. As per Petroleum Planning & Analysis Cell (PPAC), Iraq, Saudi Arabia, UAE, Nigeria, and the USA are major sources of India’s crude oil imports. As compared to overall crude oil imports of 175.900 million tons, India imported a mere 0.419 million tons of crude oil from Russia. Indian oil and gas Public Sector Undertakings (PSUs) had imported approximately less than one percent of its total crude oil import from Russia till January.

In a recent Economic Times report, Lim Jit Yang, advisor for Asia-Pacific oil markets at Platts Analytics, argues that besides expanding strategic petroleum reserves and diversifying its crude supply sources, the Indian government is making an effort to bring oil from overseas equity assets.

“Supply security is becoming increasingly important as global spare capacity has been uncomfortably low. In addition, India's aging oil wells are struggling to keep their domestic oil production steady amid growing oil demand," he was quoted as saying.