IMPORT OF RUSSIAN, IRAQI OIL TO INDIA STEPPED UP IN SEPTEMBER – India’s crude oil imports – Russia, Iraq gain at Saudi Arabia’s expense

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IMPORT OF RUSSIAN, IRAQI OIL TO INDIA STEPPED UP IN SEPTEMBER – India’s crude oil imports – Russia, Iraq gain at Saudi Arabia’s expense

The Indian Express Delhi|October 02, 2023

AFTER FALLING in August, India’s imports of Russian and Iraqi oil recovered in September, most likely due to their price advantage over comparable Saudi Arabian crude grades, even as India’s overall crude oil imports slumped to their lowest this year as the refinery maintenance shutdown season kicked in, shows an analysis of data from commodity market analytics and intelligence firm Kpler.

SUKALP SHARMA

India’s Russian oil imports had fallen to a seven-month low of 1.55 million barrels per day (million bpd) in August. In September, however, it jumped 18.3 per cent sequentially to 1.83 million bpd.

As for India’s oil imports from Iraq, September volumes were higher by 7.4 per cent over August at around 916,690 bpd. The share of Russia and Iraq in India’s September oil imports stood at around 43 per cent and 22 per cent, respectively. In August, Russia’s share was 35.4 per cent, while Iraq’s was 19.5 per cent.

Saudi Arabia, on the other hand, saw its market share contract to around 13 per cent in September from nearly 19 per cent in August. India’s oil imports from Riyadh in September were at around 556,185 bpd, down nearly a third from August volumes. Between January 2022 and August 2023, the import volumes averaged at over 750,000 bpd.

Currently, Saudi Arabia is the third-biggest supplier of crude oil to India, behind top supplier Russia, and Iraq in the second spot. Traditionally, Riyadh used to be New Delhi’s second-biggest source of crude after Baghdad. But after the war in Ukraine broke out, Russia displaced Iraq and Saudi Arabia as India’s largest oil supplier by offering deep discounts on its crude. Prior to the war, Russia was only a marginal player in India’s oil trade.

“Price competitiveness favours Russian crude and if the Indian refiners want to take term volumes from the Middle East, they seem to prefer Iraqi barrels as Basrah Medium continues to be some $2 per barrel cheaper than (the competing Saudi on its crude. Prior to the war, Russia was only a marginal player in India’s oil trade.

“Price competitiveness favours Russian crude and if the Indian refiners want to take term volumes from the Middle East, they seem to prefer Iraqi barrels as Basrah Medium continues to be some $2 per barrel cheaper than (the competing Saudi Arabian crude grades) Arab Medium or Arab Light,” Kpler’s Lead Crude Analyst Viktor Katona said. Indian refiners mostly purchase Russian crude from the spot market, while West Asian oil is predominantly bought through term contracts. A narrowing of discounts on Russian crude was seen as one of the primary reasons for the fall in India’s oil imports from Moscow in August. Industry insiders suggest that discounts started expanding after Indian refiners reduced purchases of Russian oil, which is likely to have played a role in the rebound seen in September.

The recent rise in prices of Saudi Arabian crudes–like Arab Light and Arab Medium–vis-a-vis competing medium-sour grades like Oman, Dubai, and Basrah Medium from the region has led to a reduced appetite for the former. Russia’s flagship grade Urals, which accounts for the lion’s share of India’s Russian oil imports–is also a medium sour crude.

According to Katona, while prices of medium sour grades have generally risen in the wake of Riyadh’s voluntary production curbs and Russia’s export cuts, those of the Saudi Arabian grades have climbed more and are trading at a premium. As reported earlier by The Indian Express, India’s Saudi Arabian oil imports in September were expected to fall considerably due to the price advantage of competing crude grades from other countries in the wake of production cuts by Riyadh, and impending maintenance shutdown of some units at the Jamnagar refining complex of Reliance Industries Ltd (RIL), the biggest Indian buyer of Saudi Arabian oil.

As per Kpler’s analysis, RIL accounts for around 35 per cent of India’s oil imports from Riyadh.

In fact, the maintenance shutdown at RIL along with similar activity at a few units of public sector refiners also resulted in India’s crude oil imports falling to an 11month low of 4.26 million bpd, according to Kpler data. India is the World’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. The country’s overall crude oil refining capacity stands at over 5 million bpd.

“With September crude imports into India coming at the lowest level of 2023, the stage is set for the lowest month of refinery runs, which should be in October. In October, 550,000 bpd of refinery capacity will be offline (due to maintenance shutdowns). So, even if refiners run above 100%, as has been the case for many months in 2023, they still would not be able to ramp up runs above 4.8-4.9 million bpd,” Katona said.

He expects a rebound in Indian arrivals of crude from the second half of October given that most maintenance shutdowns should be completed by the early November, and crude oil is usually imported a few weeks before the refining process.

This story was featured in October 02, 2023 of The Indian Express Delhi

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