India slashes Russian oil purchases as it becomes too expensive
Photo: an oil tanker (Getty Images)
Indian oil refineries are cutting purchases of Russian crude for delivery in November. The main reasons are the rapid rise in prices for Urals crude and increased competition from China, reports Bloomberg.
The price of Russian Urals crude loaded in the Baltic Sea has risen to a premium of more than $10 per barrel over Brent. While this grade was previously sold at a significant discount, its price has now almost reached the level of Middle Eastern grades.
Due to the loss of its price advantage, Indian refineries are being forced to change suppliers and return to crude from the Persian Gulf countries. Some Russian cargoes previously purchased by India are now being offered to independent Chinese refiners.
Competition with China and declining imports
The competition for Russian barrels has intensified due to the activity of Chinese buyers, which is partly linked to their reduced access to Iranian oil.
"China’s imports of Russian crude have been increasing over the past few months, adding competition for those barrels that would otherwise be available to Indian refiners," explained Sumit Ritolia, a senior manager at analytics company Kpler.
According to Kpler, Russia's share of India's oil imports fell to about 35% in September, although it reached a peak of 56% as recently as July.
Average deliveries over the four weeks through October 4 fell to about 310,000 barrels per day, the lowest level since March 2022.
Middle Eastern alternative and sanctions pressure
Against this backdrop, supplies to India from the Middle East continue to increase. According to Shell CEO Wael Sawan, oil flows through the Strait of Hormuz have already recovered to approximately 80% of pre-war levels.
For Indian companies, Middle Eastern oil has an additional advantage due to shorter shipping routes, which reduces transportation costs amid rising tanker rates.
The risks of US sanctions or tariff measures also remain a significant factor for Indian refineries. The reduction in purchases is primarily related to the economics of the deals, as Russian oil has lost its key price advantage over other suppliers.
Reuters reported that over the past week, Iran's attacks on tankers in the Strait of Hormuz reached their highest level since the start of the conflict with the US.
