(Image source from: REUTERS)
Russia is prepared to redirect oil to India to balance the disruptions in supply from the Middle East. According to an industry insider with direct knowledge, there are approximately 9.5 million barrels of Russian crude on ships near Indian waters, which could arrive within a few weeks. The insider did not specify the original destination of the non-Russian cargoes but mentioned they could reach India soon, providing quick support to local refiners. India is at risk of supply issues, as its crude reserves only satisfy about 25 days of demand, and local refiners have similarly low stocks of gasoil, gasoline, and liquefied petroleum gas. A source from the Indian government stated that New Delhi is looking for alternative sources to prepare for ongoing tensions in the Middle East in about 10 to 15 days.
The disruption has immediate effects on the market, as nearly 40% of India's crude imports pass through the Strait of Hormuz, which is the most crucial oil export channel in the world. The source explained that the near blockage of this route has forced the third-largest oil consumer to look for other options. Indian refiners process around 5.6 million barrels of crude daily. The Strait has become blocked after Iranian attacks on vessels, which followed U. S. and Israeli strikes on targets in Iran that began on Saturday. The industry insider, who wished to remain anonymous, stated that Russia is willing to assist India in fulfilling up to 40% of its crude requirements. India's imports of Russian crude declined to about 1.1 million barrels per day in January, the lowest level since November 2022, as New Delhi attempted to alleviate U. S. tariffs. This caused Moscow’s share of overall oil imports to decrease to 21.2%, according to industry data. The insider noted that this share increased to about 30% in February.
Indian oil processors frequently communicate with traders who deal in Russian crude, but any increase in the amount they buy from Russia would rely on instructions from the government as negotiations with the United States are ongoing, according to two sources from the refining sector. Last month, U. S. President Donald Trump consented to remove heavy tariffs imposed on imports from India regarding its acquisition of Russian oil, noting that New Delhi had agreed to "stop buying Russian oil." However, India maintains that it has not halted purchases, emphasizing its plan to diversify its sources of oil based on market trends and changing global situations. The foreign and oil ministries of India, along with the Russian embassy in New Delhi, have not promptly responded to inquiries about any increase in oil purchases from Russia. An Indian insider mentioned days prior to the Iran conflict that Indian firms were not instructed to avoid Russian oil.
Since Russia invaded Ukraine in 2022, Russian oil has been offered at lower prices compared to global rates, but this price difference is expected to decrease because "the market now favors sellers," stated an industry insider familiar with Russian oil trading. The insider also mentioned that Russia is prepared to sell liquefied natural gas to India after its main supplier Qatar stopped production on Monday amid escalating conflict. Reports indicate that Indian companies have cut gas supplies to some industrial clients to cope with the reduced availability. China and India, being the largest energy consumers in Asia, rely on about half of their crude imports from the Middle East, yet India has much less stored oil than China and is more vulnerable to disruptions in supply due to decreased Russian purchases under U. S. pressure. On Tuesday, Trump stated that the U. S. Navy could protect oil tankers traveling through the Strait of Hormuz if required, and he directed the U. S. International Development Finance Corporation to offer political risk insurance and support for shipping in the Gulf.
