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India continues to buy a lot of Russian oil despite a significant narrowing in its discount to Brent, Bloomberg has reported, citing sources from local refiners.
In early August, the price of Russia’s flagship Urals blend delivered to the west coast of India hit $81 per barrel. Just a month earlier that price was around $68, Argus pricing data cited in the report shows.
Purchases, however, have not slowed down because, according to Bloomberg sources, comparable oil blends from Middle Eastern producers cost more.
“There was a perception that India had limited capacity to refine medium sour grade of Russian crude, which would create a natural ceiling on Russian imports,” a Citi analyst told Bloomberg.
“It has now been clearly demonstrated that such a bottleneck does not exist. This would imply that Indian refiners can continue with their Russian oil imports as long as discounts outweigh the higher logistics cost of imports,” Samiran Chakraborty, chief India economist at the Wall Street bank, also said.
Last year, Russian exports of crude oil to India rose tenfold from the previous year, the Indian Bank of Baroda reported earlier this year.
This year, shipments of Russian crude to the subcontinent remained strong, putting Russia at the number-one spot as oil supplier to India, replacing Saudi Arabia. In June, Russian oil exports to India hit a record high of 2.2 million barrels daily, Kpler data cited by the Indian Express showed.
In July, exports were expected to ease, as a result of greater demand at home and lower demand in India amid the monsoon season, which also coincides with partial refinery shutdowns for maintenance.
Once the monsoon is over, however, Kpler expects a rebound in Russian oil shipments to India, with analyst Viktor Katona forecasting “a deluge of Russian cargoes in India from October onwards.”
“As long as there is any discount on Russian crude versus comparable grades on a landed basis, there will be demand for it in India,” energy analyst Vandana Hari from Vanda Insights told Bloomberg.