Indian refiners are poised to increase their imports of Russian crude oil in September, despite recent tariffs imposed by the United States. According to traders, discounts on Russian crude are deepening as a result of reduced refining capacity in Russia following Ukrainian drone strikes.
The largest state-owned refiners in India, including IndianOil and BPCL, had previously withdrawn from spot purchases of Russian crude for October shipments after the U.S. announced a new 25% tariff on Indian imports of Russian oil. This tariff is part of a broader 50% tariff on Indian goods that took effect on August 27, 2023. Despite these challenges, Indian refiners are expected to boost their imports by between 150,000 barrels per day (bpd) and 300,000 bpd, representing a 10-20% increase from August levels.
The surge in Russian crude exports is linked to ongoing disruptions to Russia’s refining capabilities caused by drone strikes in Ukraine. As a consequence, Russian sellers are offering more attractive discounts to encourage Indian refiners to continue purchasing their oil. According to Ivan Mathews, Head of APAC Analysis at the energy analytics firm Vortexa, the demand for crude in India is expected to strengthen in the coming months, leading to an uptick in crude arrivals.
Mathews noted, “We expect refineries in India to continue processing Russian oil, as their feedstock procurement decisions are mainly economics-driven.” This statement underscores the economic motivations behind India’s continued engagement with Russian crude, despite the geopolitical implications.
In light of the strained U.S.-India trade relations, the Trump Administration has targeted India specifically for its reliance on Russian oil. Nevertheless, India and Russia have continued to emphasize their strategic partnership, engaging in high-level discussions and affirming their cooperation in the energy sector. This suggests that India remains committed to capitalizing on the discounted crude from Russia despite the external pressures.
As September approaches, the expected increase in crude imports highlights the complex interplay of economics and geopolitics in the global oil market. With Indian refiners capitalizing on lower prices, the dynamics of energy procurement are set to evolve further in the coming months.
