In the wake of widespread Western sanctions against Russian oil last year, India decided not to align with the West. This decision allowed India to continue receiving cheap crude oil from Russia, and even reselling the refined Russian oil to Europe - a strategy that has proven lucrative over the past year.
However, the days of cheap Russian oil for India are now over.
According to a statement from an Indian government official on Monday, July 17, India has begun negotiations with traditional Middle Eastern oil exporters to increase its oil purchases. The reason behind this is that Russian oil has lost its price advantage.
The official stated that the steep reduction in discounts on Russian oil prices has diminished the allure of the country's main export grade, Urals crude oil. Consequently, India has become more cautious in purchasing crude oil from Russian suppliers. He mentioned that India's oil imports from Russia may decline as the increase in oil prices could lead to higher costs for refineries.
At the end of last year, Western countries allowed nations to import Russian crude oil using European ships and insurance, provided that the price of the Russian oil purchased did not exceed $60 per barrel.
According to Argus Media, a company that provides global energy and commodity market data, price information, and consulting services, the price of Urals crude oil from Russia's Black Sea port surged to $60.78 per barrel last Wednesday. This marks the first time it has surpassed the $60 threshold since the G7 implemented price limits last year.
In previous oil trades, India primarily paid Russia in U.S. dollars. However, they have now begun to also pay in United Arab Emirates Dirham and Renminbi to keep the trade flowing. Indian Oil Corporation is the first Indian state-run refinery to pay Russia in Renminbi. The official said that most of India's oil merchants buy Russian crude oil from traders in the spot market, where the sellers must arrange shipping and insurance.
Since last year, India has significantly increased its crude oil imports from Russia. According to data from energy cargo tracking firm Vortexa, India set a new record for imports of Russian crude oil in May, reaching a historic high of 1.96 million barrels per day. This surpassed the combined imports from Iraq, Saudi Arabia, the UAE, and the U.S., which totalled 1.74 million barrels per day.
The data shows that in May, Russian oil imports made up 42% of India's total crude oil imports. However, in January 2022, nearly all of India's oil imports came from the Middle East, with less than 2% dependency on Russia.
As India massively imported Russian oil, the share of OPEC member countries in India's oil supply significantly declined, falling to its lowest level in twenty-two years.
