India benefits from Russian oil sanctions

If Europe is gradually cutting off its oil supply from Russia, India is in the process of absorbing part of it at very good prices. And could re-export the refined products to its European customers.

The troubles of some are the business of others. India seems to adopt this new adage. Since the start of the war in Ukrainebased on the average from March to May 2022, Indian imports of Russian crude increased by 658% compared to 2021 levels, while for China the increase is 205% and for Asia as a whole 347%, according to Rystad Energy’s research center. India has imported840,000 barrels per day (bpd) of Russian crude in May, according to data from Kpler. And June imports are estimated at 1.05 million bpd, which means that Russia’s share of India’s total imports will rise to around 25%a dramatic spike considering they accounted for around 2% of the total last year.

658%

Increase

Since the start of the war in Ukraine, based on the average of March to May 2022, Indian imports of Russian crude have increased by 658% compared to 2021 levels.

“Historically, India imported very little Russian oilbut the war in Ukraine and the embargoes on oil of Russian origin imposed by the European Union led to a rebalancing of oil trade flowswith Russian-origin crude oil being diverted from Europe to India and China,” says Wei Cheong Ho, vice president at Rystad Energy.Discounts on crude oil of Russian origin must remain high to supply an attractive refining margin in addition to offsetting the high insurance and freight costs associated with purchasing and shipping Russian-origin crude oil.”



“India historically imported very little Russian oil, but the war in Ukraine and the embargoes on Russian-origin oil imposed by the European Union have led to a rebalancing of oil trade flows.”

Wei Cheong Ho

Vice President of Rystad Energy

On this side, the calculations are rather favorable. Indian refiners benefit from lower prices from their Russian suppliers, up to $40 a barrel below Brent benchmark prices. A level so interesting that India is now turning away from its historical producers in the Middle East. The price difference more than covers the higher shipping cost (several weeks for oil from the Baltic Sea against 6 days from the Arab-Persian Gulf), as well as insurance costs.

Since the Western sanctions, insurers had stopped short of contracts on Russian tankers. A problem that India has circumvented: the subcontinent now provides safety certification for dozens of ships managed by a Dubai subsidiary of the main Russian maritime group Sovcomflot, according to official data. An activity making it possible to limit the increase in fuel prices in the country, but also toexport to foreign markets with comfortable margins.

Prevent the barrel from flaming

According to data from Kpler, 10.81 million barrels of Russian crude arrived in May at the port of Sikka in northwestern India, which handles crude imports from Indian refiner Reliance Industries. Still according to Kpler, the port of Sikka also exported 2.56 million barrels of diesel to Europe in May, while it shipped 890,000 barrels of gasoline to the United States in April. The same port exported 2.0 million barrels of diesel, or around 64,500 bpd, to Australia in May. “Ironically enough, any increase in India’s diesel exports to Europe is likely to come, at least in part, from its growing imports of Russian crude,” Wei Cheong Ho said.



“Ironically enough, any increase in India’s diesel exports to Europe is likely to stem, at least in part, from its growing imports of Russian crude.”

Wei Cheong Ho

Vice President of Rystad Energy

Nayara Energy, which operates India’s second-largest refinery, could also be one of the players exporting refined fuel made from Russian crude. Nayara is owned by a subsidiary of Russia’s Rosneft and a subsidiary of commodities trader Trafigura and operates a refinery in Vadinar on India’s west coast. According to the Bloomberg agency, state-owned Indian Oil is said to be negotiating more contracts supply with the Russian energy giant Rosneft. Last April, the US president discussed the situation with Indian Prime Minister Narenda Modi. Without making it a state affair.

“Washington and the Europeans will let it go,” Marc-Antoine Eyl-Mazzega, director of Ifri’s Center for Energy and Climate, told the French daily Les Echos.. “There is almost no more flexibility in the oil market and almost 20% of world exports are under sanctions: Russia, Iran and Venezuela, not to mention the difficulties in Libya and Kazakhstan. The fact that Russia can continue to export its oil mitigates the shock, it prevents the barrel from blazing at 180 dollars. Nobody wants to go into a recession or an uncontrolled social shock.”

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