Indian refiners widen oil hunt as Russian flows hurt

Indian refiners are scaling back their purchases of Russian crude oil following the impact of Ukrainian attacks on the nation's primary supplier. With diminished crude exports from Moscow, processors have been searching for alternative barrels from regions such as West Africa and even the Americas, while also turning to Persian Gulf suppliers despite ongoing restrictions through the Strait of Hormuz due to the US-Iran conflict.

This shift in buying patterns aligns with an anticipated rise in nationwide demand as a series of plant maintenance activities concludes, allowing refiners to increase production rates and output. China has been boosting imports of Russian crude, potentially hindering India's refiners.

Global crude markets are currently grappling with disruptions stemming from conflicts between Russia and Ukraine, as well as the Middle East. Russia emerged as India's dominant supplier after the start of the Ukraine war in 2022, with Russian crude accounting for more than half of India's imports last month. However, imports of Russian crude are expected to decrease to approximately 2 million barrels per day this month, down from a peak of around 2.8 million barrels in July, according to Sumit Ritolia, a senior manager of modeling at Kpler analytics firm.

The decline in Russian crude imports reflects some normalization after strong crude-buying in recent months, lower Russian export availability, and increased competition from China. Additionally, maintenance activities are contributing to the reduction in imports. Russia's crude flows to India are now projected to normalize above the 2-million-barrel-per-day level in the coming months, Ritolia added.

Indian Oil Corp., the country's largest refiner, recently issued tenders for supply from distant regions like the Americas and the Persian Gulf, a rare move, as well as one targeting mainly Persian Gulf crudes. Other industry peers, including Hindustan Petroleum Corp. and Mangalore Refinery & Petrochemicals Ltd., also made recent purchases of non-Russian crude.

However, Indian Oil Corp., Hindustan Petroleum Corp., and Mangalore Refinery & Petrochemicals Ltd. have not yet responded to requests for comment.

The persistent Ukrainian attacks on Russia's refineries and Black Sea ports have led to local fuel shortages, preventing Moscow from redirecting crude into the export market. Over the past four weeks, overseas shipments have fallen to approximately 3.5 million barrels per day, down from a high of over 4 million barrels per day in July, as reported by Bloomberg tanker-movement data.

India is also competing with China for discounted barrels, with Kpler's Ritolia noting that October-loading cargoes of Sokol, which ship from Russia's east, were purchased unusually early, indicating strong forward demand and rising interest in available grades. India and China typically do not compete for western and eastern Russian oil varieties, respectively, but the tightening market may alter this dynamic.