New Delhi, Sept. 5: India’s crude oil imports from Russia—New Delhi’s largest source market for oil—cooled off sequentially in August from July’s near-record levels as oil demand evidently softened in the run-up to the refinery maintenance season, according to ship tracking data and industry watchers. Relatively lower availability of Russian oil for the export market was also a likely factor.

Oil market experts expect India’s oil imports—including from Russia—to be slightly subdued in September as well due to maintenance shutdowns at a few refineries, before recovering again in October as the affected refining capacity comes back on stream in the festival season, which is usually marked by high fuel demand.

India’s Russian oil imports declined 14.5 per cent—or by 0.31 million barrels per day (bpd)—sequentially in August to 1.80 million bpd, but still accounted for a whopping 39.9 per cent of the New Delhi’s total crude oil imports for the month, per provisional vessel tracking data from commodity market analytics firm Kpler. Notably, India’s overall oil imports for the month also declined by a similar volume—0.32 million bpd—to 4.52 million bpd.

“Interestingly, Russia’s oil exports have also gone down by 350,000 bpd…So there is less Russian availability, lower Indian crude intake, and generally less movement (of oil),” said Viktor Katona, head of crude analysis at Kpler.

“Peak maintenance season in India is September. By November, refinery runs would climb back to their normal range of 5.4-5.5 million bpd. September imports from Russia should also be weak. However, October onwards, they would start to edge higher again, also boosted by higher availability of Russian crude as Russia is set to undergo its own period of turnarounds (refinery maintenance activities) over the upcoming weeks,” Katona said on the supply outlook for the forthcoming months.

As for other top suppliers, oil imports from Iraq—India’s second-largest source of oil—rose 6.7 per cent sequentially to 0.85 million bpd. However, New Delhi’s third biggest source market for oil—Saudi Arabia—registered a 16.6 per cent sequential decline in volumes delivered to India in August at 0.55 million bpd.

Iraq had a market share of 18.8 per cent in India’s oil import basket in August, up from 16.5 per cent in July. Russia’s market share was 43.5 per cent in July, 3.6 percentage points higher than its share in August. Saudi Arabia’s market share contracted to 12.2 per cent in August from 13.7 per cent in July.

“Saudi Arabia’s 550,000 bpd is 200,000-250,000 bpd below last year’s average range of purchases. So, it would be fair to say that India’s appetite for Saudi Arabian oil has not come back, even after import of Saudi oil hit a 10-year low in June,” Katona said, adding that Saudi Arabian crude continues to remain expensive for Indian refiners vis-à-vis oil from Russia and even Iraq. On the other hand, Iraq has evidently further cemented its position as India’s dependable second-largest supplier, widening the gulf with Saudi Arabia.

Prior to the war in Ukraine, Iraq and Saudi Arabia were the top two suppliers of crude oil to India. But as the West started weaning itself off Russian energy supplies following Moscow’s February 2022 invasion of Ukraine, Russia started offering discounts on its crude and Indian refiners started snapping up the discounted barrels.

Urals, a medium-sour crude, is the mainstay of India’s Russian oil imports. In August, Indian refiners cumulatively imported 1.26 million bpd of Urals crude. India’s Urals import volumes for the month accounted for 70 per cent of New Delhi’s total oil imports from Moscow. Evidently, the price differential between Urals and competing crude grades from India’s traditional West Asian suppliers was significant enough for Indian refiners to prefer the Russian grade.

As the world’s third-largest consumer of crude oil with a high import dependency level of over 85 per cent, India is extremely sensitive to oil prices. Although trade sources have indicated that discounts on Russian crude have shrunk over time, Indian refiners have evidently remained keen on buying Russian oil as given the high import volumes, even lower discount levels lead to significant savings.-Agencies