Russian oil supply to India tightens on reduced exports, strong Chinese demand

Indian refiners anticipate a tightening of Russian oil supplies to their country in October and November, as reduced exports and strong competition from China force them to seek more expensive alternatives. India has been the leading buyer of Russian Urals crude since 2022, when Moscow began diverting its energy exports away from Europe at discounted rates.

However, China has recently increased its purchases of Russian oil as supply constraints from the Middle East persist due to the ongoing Iran war. Some Indian refiners may not receive sufficient Russian supplies in the coming months, as demand from China has been notably high, with Chinese buyers willing to pay higher prices and book cargoes in advance.

Russian oil arrivals to India are projected to drop to around 1.75 million barrels per day in September, the lowest level since April, according to Kpler analytics. This decline has been driven by a 16.5% decrease from August 2024, when imports were around 2.1 million barrels per day. Despite the drop, Russia remains India's primary crude supplier, followed by the United Arab Emirates and Venezuela.

However, Russian export availability has narrowed, especially from the Black Sea port of Novorossiysk, where shipments have fallen by roughly half due to repeated drone attacks. Indian refiners are exploring alternatives such as UAE Murban, Iraqi Basrah, and Angolan supplies to mitigate the impact of the Russian supply squeeze. Shipping dynamics have also played a role, with the Arctic Northern Sea Route providing a safer and more cost-effective route for Russian crude exports to China, whereas the Red Sea route for shipments to India faces heightened security risks due to Yemen's ongoing conflict involving Iran-aligned Houthis.

One trader emphasized that the focus is more on ensuring the cargo reaches its destination, as freight costs via the Arctic route to China are now comparable to shipments via the Suez Canal.