Russia's Crude Exports to India Decline Amid Security Concerns
India's reliance on Russian oil has been a long-standing trend, but recent data suggests that this may be changing. In August, India imported 2.08 million barrels per day (b/d) of Russian crude, down from 2.8 million b/d in July and matching May levels.
This decline is not entirely due to the usual refinery maintenance period at the end of the monsoon season. Many Indian refiners have postponed their planned work due to strong fuel margins on the market, which has made it more profitable for them to continue operating rather than shut down for maintenance.
Domestic consumption in India remains strong, with diesel and petrol demand increasing by 10% year-on-year in July. This is likely due to the effects of El Niño, which has led to below-average monsoon rainfall and increased irrigation demands.
The sharper constraint on Indian oil imports is Russian supply, not demand. Total seaborne Russian crude exports fell to 3.7 million b/d in August, down from 4.1 million b/d in July. The decline was concentrated at the Black Sea port of Novorossiysk, which has been a key departure point for Russian crude exports to India.
The main reason for this decline is security concerns due to Ukrainian drone attacks on the Black Sea. Moving a Suezmax cargo from Novorossiysk to India's west coast now costs about $20 million, equivalent to roughly $20/bbl, compared with about $13 million, or $13/bbl, if transported from the Baltic Sea ports.
Russian exporters are increasingly using the Northern Sea Route (NSR) instead of the Black Sea route due to the risks associated with sailing around Europe. This has led to an increase in Russian exports to China, which is now competing more aggressively for available cargoes.