Indian Oil Refiners Pivot to American Crude Amidst Tightened Sanctions

Indian oil refiners are poised to increase their intake of American crude to the highest levels in nearly a year, propelled by stringent enforcement of US sanctions that has constrained trade with Russia and compelled processors to seek alternative sources.

State-owned Bharat Petroleum Corp. and Indian Oil Corp., alongside leading private refiner Reliance Industries Ltd., have reportedly procured approximately 7 million barrels of US crude slated for loading in April, according to undisclosed traders.

This surge represents the largest monthly volume since May, as reported by Kpler.

Following the invasion of Ukraine, Indian reliance on Russian crude escalated, with Russia remaining the primary supplier to the South Asian nation. However, intensified US sanctions have disrupted Russian crude flows, narrowing discounts and stranding cargoes. In response, India has recently bolstered its purchases from Saudi Arabia.

Despite attempts to reach Bharat Petroleum, Indian Oil, and Reliance Industries for comment, responses were not immediately available.

Most of the US crude secured this month is West Texas Intermediate Midland, albeit at a higher delivered cost compared to Middle Eastern barrels, note traders. Notably, Russia’s Sokol oil, similar to WTI Midland, has borne the brunt of disruptions.

Indian refinery officials, speaking anonymously due to company policy, suggest that WTI Midland’s ability to produce more gasoline and diesel aligns with anticipated heightened demand in the coming months, attributed to local elections, increased power generation, and crop harvesting.

“Given the challenges associated with importing Sokol, Indian refineries turning to US WTI Midland as a viable light-sweet alternative is unsurprising,” remarked Dylan Sim, an analyst at industry consultancy FGE.

While US crude constituted 10 percent of India’s imports in 2021, this figure dwindled to as low as 4 percent over the past two years, as Russia expanded its market share, according to Sim.

Furthermore, tighter enforcement of sanctions has impacted other Russian crude varieties, including Urals from the nation’s western ports. Notably, two tankers carrying this grade have remained idle off the Indian coast for several weeks.

According to Kpler data compiled by Bloomberg, India’s imports of Russian crude last month amounted to around 40 million barrels, comprising nearly 30 percent of the country’s total oil and condensate purchases. Throughout 2023, Russia’s share of the Indian market averaged 39 percent.