Indian refiners sourced more crude oil from Iraq, Africa, the US and the UAE in July 2023 as Russia and Saudi Arabia continued with their voluntary crude oil production cuts.

Besides, another reason for India sourcing more oil from Iraq and the UAE is as an alternative to Saudi Arabian supplies as the world’s largest exporter raised the official selling price (OSP) of most of its crude to Asia for the third month running in September.

Energy intelligence firm Vortexa’s Head of APAC Analysis, Serena Huang told businessline “Indian refiners are increasingly sourcing for alternative crude supplies as Russia and Saudi Arabia cut back on their crude exports. Saudi Arabia’s additional production cuts and raising of its OSPs have driven refiners to look towards other Middle Eastern crude suppliers to supplement their crude demand.”

The narrowing of Brent-Dubai differentials as a result of tighter Saudi crude supplies, have also made Atlantic Basin grades more economically attractive these days compared to the past few months, and hence, the uptick in imports by refiners, she explained.

Alternate sources

According to Vortexa, crude oil imports from Africa to India rose 32 per cent M-o-M to 298,000 barrels per day (b/d) in July 2023, while those from the USA went up by about six per cent to 219,000 b/d.

Similarly, in-bound shipments of the key commodity from Iraq were higher by 7.5 per cent M-o-M to 891,000 b/d, while those from the UAE surged by 76 per cent to hit 290,000 b/d on a lower base in June 2023. On the other hand, imports from Saudi Arabia fell by 33 per cent on a monthly basis to 484,000 b/d.

In the case of Russia, India’s largest crude oil supplier, Indian refiners, particularly state-run OMCs, stocked up on Urals fearing supply disruptions during August and September as Russia limits exports to shore up prices and meet domestic diesel demand.

Refiners imported around 1.60 million barrels per day (mb/d) of the medium sour grade last month, higher by 18 per cent compared to June and 14 per cent higher than the record in May 2023.

India’s preference for Russia’s largest export grade can be gauged from the fact that its imports are close to the combined shipments by the other three top suppliers—Iraq, Saudi Arabia and the UAE—at 1.67 mb/d.

Production cuts

Saudi Arabia and Russia will continue with the voluntary production cuts in August and September. While Saudi Arabia extended its production cut of one mb/d to the end of September, Russia announced a cut of 300,000 bpd. Saudi Arabia has also indicated that the production cuts could be extended, if needed.

Production cuts by the world’s top two crude oil exports have strengthened prices with Brent hovering at $86.81 a barrel and WTI at $83.19 on Sunday afternoon.

Going ahead, trade sources said, prices will depend on the intensity of production cuts by Saudi Arabia and Russia, as well as the economic sentiments in China and the European Union.