Russia accounted for around 40 per cent of India’s total crude oil imports in February this year. This makes Russia the largest supplier of crude for the fourth straight month.

“Russia accounted for around 40 per cent and 20 per cent of Indian and Chinese crude imports, respectively, in February,” said the International Energy Agency’s (IEA) in its oil market report for March 2023, which was released on Wednesday.

According to energy intelligence firm Vortexa, India imported around 1.6 million barrels per day (mb/d) of Russian crude oil in February 2023. India and China, the world’s top fossil fuel consumers, procured more than 70 per cent of Russia’s crude exports last month, which stood at 7.5 mb/d, the global agency added.

Even as Russian oil production sustained near pre-war levels in February, its exports globally fell over 500,000 barrels per day last month. “The market is caught in the cross-currents of supply outstripping still-lacklustre demand, with stocks building to levels not seen in 18 months. Much of the supply overhang reflects ample Russian barrels racing to re-route to new destinations under the full force of EU embargoes,” the IEA pointed out.

Over the past year, 4.5 mb/d of Russian oil previously going to the EU, North America and OECD Asia Oceania has had to find alternative outlets. “Willing buyers in Asia, namely India and, to a lesser extent, China, have snapped up discounted crude oil cargoes, but increasing volumes on the water suggest the share of Russian oil in their import mix may be getting too big for comfort,” IEA has warned.

A senior government official said: “Nobody wants Russian supply to stop. The objective is to dilute its export earnings from crude oil, and till the time rates are below the G7 price cap ($60 per barrel), there are no issues.”

Why did oil prices fall below $75 per barrel?  Why did oil prices fall below $75 per barrel?  

Better OMC margins

State-controlled and private refiners in India, which emerged as Russia biggest crude oil buyer since October-November 2022, have been lapping up cheap Russian crude oil, particularly the Ural blend that now constitutes almost 80 per cent of India’s in-bound shipments from Russia, said trade sources.

Russia is offering discounts on Ural to Indian refiners, which has aided the oil marketing companies (OMCs) to shore up their financial metrics that were severely impacted due to the retail price freeze on petrol and diesel since April last year. The discounts are in the range of $15-20 per barrel, said one of the sources.

According to ICICI Securities, OMC’s profit margins are expected to inch towards the green line in FY24, particularly in the April-September period.