After the new US ban on major importers of Russian crude oil is fully implemented, energy market analysts believe that the import of Russian oil into India will decrease rapidly in the near future, although it will not stop completely. US sanctions on Rosneft and Lukoil and their majority-owned subsidiaries came into effect on November 21. Due to this, it has now become almost impossible for these companies to buy or sell crude oil.
India imported an average of 1.7 million barrels per day of Russian oil this year and remained strong before the sanctions. Imports in November are estimated at 1819 lakh barrels per day, as refineries are maximizing purchases of cheap oil. Going forward, a clear decline in supply is expected in December and January. According to analysts, it may come down to about four lakh barrels per day. India, traditionally dependent on West Asian oil, significantly increased its oil imports from Russia after the attack on Ukraine in February 2022.
Due to Western sanctions and reduced European demand, oil from Russia became available at huge discounts. As a result, India’s Russian crude oil imports increased from one percent to nearly 40 percent of total imports. Even in November, Russia remained India’s largest supplier, accounting for about one-third of total imports.
There will be a decrease in Russian oil supply
Sumit Ritolia, chief research analyst, refining and modeling at Kpler, said we expect a pronounced decline in Russian crude oil flows to India in the near future, especially in December and January. Supplies have slowed since October 21, although it is too early to draw final conclusions given Russia’s ability to arrange intermediaries and alternative finance. Due to the implementation of sanctions, companies like Reliance Industries, HPCLMittal Energy and Mangalore Refinery have currently stopped importing Russian oil. The only exception is Nayara Energy, which is backed by Rosneft and is heavily dependent on Russian oil due to supply cuts from other sources following sanctions imposed by the European Union.
Russian oil made huge profits
Ritolia said that except for Nayara’s Vadiner plant, none of the Indian refiners want to take the risks associated with OFAC-designated entities. It will take time for buyers to rearrange their contracts, supply routes, ownership and payment channels. Analysts say cheap Russian oil has provided huge profits to Indian refiners in the last two years and kept retail prices of petrol and diesel stable despite volatility in the international market. India fulfills 88 percent of its oil needs through imports. With the full implementation of the new US ban, India’s Russian oil imports have entered a volatile and uncertain period. According to experts, oil coming from Russia will not end completely, but the flow will decline in the near future.