Russian Oil Is No Longer India’s Easy Bargain

India's crude imports saw a decline in August, with Russia's share decreasing alongside them, highlighting a supply issue that maintenance alone cannot fully explain. Typically, Indian refineries undergo maintenance during the monsoon's end, but the ongoing market crisis has led to postponements. Demand for refined products has remained strong.

The more significant change lies in Russia's reduced crude exports to India and overall. Meanwhile, China is becoming more competitive in securing Russian barrels. India imported 2.08 million b/d of Russian crude in August, returning to May levels after July's 2.8 million b/d. Overall crude imports fell to 4.7 million b/d from 5.05 million b/d, still the highest for that month in five years.

However, maintenance may only partially account for the retreat, as high fuel margins have delayed most refineries' planned monsoon-season maintenance. BPCL's Mumbai refinery initially scheduled work for September but shifted it to November, while CPCL's Manali refinery in Chennai is expected to perform partial maintenance. MRPL's 60,000 b/d CDU-I is set to shut for four weeks towards the end of September.

Meanwhile, domestic consumption has been stronger than usual, with July demand for diesel and petrol about 10% higher than a year earlier. The primary constraint is Russian supply, which declined to 3.7 million b/d in August, primarily at the Black Sea port of Novorossiysk. Security concerns due to Ukrainian drone attacks have impacted Russian ships, vessels, and the Caspian Pipeline Consortium terminal.

Freight economics favor avoiding the Black Sea, but the Northern Sea Route is becoming more attractive. China's crude purchases increased, and competition from China is intensifying as Russian exporters focus on the NSR. India is diversifying its supply base, with the UAE, Saudi Arabia, Iraq, and Kuwait contributing to its imports.