Russian Crude Oil: After the new sanctions imposed by the US on major exporters of Russian crude oil are fully implemented, energy market experts believe that the import of Russian oil to India will decline rapidly in the near future, although it will not stop completely.
US sanctions have come into effect on Rosneft, Lukoil and their majority-owned companies from November 21. After these restrictions, it has become almost impossible to buy or sell crude oil from these companies.
India imported an average of 17 lakh barrels of Russian oil per day this year. It is expected to increase to 18–19 lakh barrels per day in November, as refineries are buying more and more cheap oil before the restrictions come into effect. But there is a possibility of a sharp decline in its supply in December and January. According to experts, it can come down to about 4 lakh barrels per day.
How did India’s dependence on Russian oil increase?
India, traditionally dependent on West Asian crude, started buying large quantities of oil from Russia after the Ukraine war started in February 2022. Due to Western sanctions and reduced demand from Europe, Russia started selling crude oil at a huge discount. As a result, India’s Russian oil imports increased from 1% to almost 40% of total imports. Even in November, Russia remained India’s largest oil supplier, accounting for about one-third of total imports.
Decline certain in December-January
Kpler research analyst Sumit Ritolia said that we expect a clear decline in Russian crude oil flows to India in the near future, especially in December and January. “Deliveries have slowed since October 2021, but given Russia’s capacity as intermediaries and alternative financial management, it is too early to draw final conclusions.”
Following US sanctions, Reliance Industries, HPCL-Mittal Energy, and Mangalore Refinery have currently stopped purchasing Russian oil. The only exception is Nayara Energy, which is backed by Rosneft and is highly dependent on Russian oil in the absence of alternative sources following European sanctions.
Ritolia said that except Nayara’s Vadiner plant, no Indian refiner is willing to take the risks associated with OFAC-designated entities. “It will take time for buyers to rearrange their contracts, supply routes, ownership structures and payment channels.”
impact on indian market
Cheap Russian oil has been a major source of profit for Indian refiners in the last two years. Due to this, the retail prices of petrol and diesel have remained stable despite the instability in the international market. India meets 88% of its oil requirements through imports.
Now that US sanctions have come into full force, India’s Russian oil imports have entered an unstable and uncertain phase. Experts believe that there will be no complete stoppage of oil from Russia, but there will be a clear and sharp decline in its supply in the near future.
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