Russia still No.1 oil source despite fall

NEW DELHI :Russia remained the top supplier of crude oil to India in July as it exported crude oil worth $3.37 billion during the month, showed data from the ministry of commerce and industry. However, compared to June, the imports from Russia declined 11.4% in terms of value.

In June, India had imported crude oil worth $3.80 billion. The month-on-month decline comes in the backdrop of narrowing discounts on the Russian oil and with supply cuts by the country in tandem with Opec+ decision, analysts said.

India imported crude oil worth $8.96 billion and Russian supplies constituted 37.62% of the overall imports in value terms. Russia has emerged as a major supplier of oil to India in the past 18 months as the country offered discounted oil amid sanctions from the West in reprisal for its invasion of Ukraine.

In FY22, Russian oil accounted for only 2% of India’s total oil imports; in FY23, it made up around one-fourth of the 235.52 million tonnes of crude oil imported by India.

India’s overall oil import bill fell $10.01 billion in June 2023 to $8.96 billion in July, the data showed.

On a year-on-year basis imports, Russian oil imports continued to witness growth as imports from the country rose 42.54% from $2.36 billion in July 2022. For April-July this year, import of crude from Russia stood at $15.74 billion, nearly 127% higher than $6.93 billion during the corresponding period of the last fiscal.

This rise of Russia as the top oil supplier to India comes with Opec members losing their market share in India.

Iraq, which is traditional oil supplier to India, has witnessed a decline of 38.6% on a YoY basis in its supplies to India during the April-July period at $6.9 billion. Saudi Arabia, the second largest oil producer in the world, sold oil worth $6.90 billion during the first four months of the fiscal, down nearly 27% from the corresponding period of the last fiscal.

On a month-on-month basis, too, Iraq and Saudi Arabia witnessed a decline of 6.5% and 5.3%, respectively, as their supplies to India in July stood at $1.76 billion and $1.41 billion.

India and China are among the top oil consumers in the world and the West Asian countries would not want to lose these markets, according to analysts. In order to tap these the key Indian market, Iraq has also offered discounts in the past several months and Saudi Arabia has lowered the Asian Premium charged on the oil selling price.

On Thursday, Mint reported that Saudi Arabia has slashed the premium charged on exports to India after India began sourcing the bulk of its energy requirements from Russia. Asian premium is an extra amount levied by the Organization of the Petroleum Exporting Countries (Opec) from Asian countries above the actual selling price. India has repeatedly pressed oil producers to eliminate this premium and even asked for an ‘Asian discount’ instead. Saudi Arabia has now reduced the premium to $3.5 per barrel from around $10 in the past year.

The oil prices which have significantly declined from the multi-year highs reached last year, have been increased over the past three months amid extended supply cuts by the OPEC+ and its key members Russia and Saudi Arabia.

This week Brent crossed the $95 per barrel mark. At the time of writing the story, the November contract of Brent on the Intercontinental Exchange was trading at $93.01 per barrel, lower by 0.56% from its previous close.

This rise in prices and narrowing down of discounts by Russia may impact the refining margins of Indian refineries and oil marketing companies.

Already, in the first quarter of this fiscal, the gross refining margin (GRM) of OMCs have declined from the highs of the corresponding quarter of FY238. Data from the Petroleum Planning & Analysis Cell showed that the GRM of Indian Oil Corporation (IOC) in the April-June quarter was at $8.34 per barrel, against $34 per barrel in the same period of last fiscal.

Similarly, the GRM of Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) fell to $12.64 and $7.44 during Q1FY24 from $27.51 and $16.69 a barrel respectively in Apri-June FY23.

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