India’s crude oil imports from Russia are expected to remain subdued during the summers as its refineries undergo maintenance, while the erstwhile Soviet Union is curbing exports to increase production of gasoline for meeting domestic demand.

According to Kpler, Russia’s largest seaborne crude oil buyer imported 1.66 million barrels per day (mb/d) of crude oil in June, down 26 per cent m-o-m from 2.23 mb/d in May 2023.

When asked whether imports going ahead would be subdued, Kpler’s Lead Analyst (Dirty Products and Refining) Andon Pavlov told businessline “To a degree, yes. There is also the factor of seasonality of Indian refinery runs (in light of the monsoon season), that will probably keep imports in check over the rest of summer.”

He further pointed out that, “The story around Russian crude export reductions is more related to rising domestic crude intake, as gasoline shortages across Russia start to push domestic prices high. Beyond the summer season, we see little reason for Russian crude exports to suffer, in fact, we are not yet fully convinced that there will be a full-fledged decline in Russian crude supply, beyond some cosmetic shave-offs.”

Return of the Middle East and the US?

As Russian supplies to India slows down, the world’s third largest energy guzzler increases cargoes from the US and its traditional trading partner, the Middle East, trade sources said.

When asked about declining barrels from Russia leading to India turning towards the US and Middle East, Pavlov said “Difficult to see it. At this stage, India is Russia’s second largest export market for crude so it is not feasible for Russia to trim exports in any meaningful form for the foreseeable future.”

Currency issues

Several analysts have pointed out the issue of currency as Russia’s Ural grade has already surpassed the G7 price cap of $60 per barrel.

They said that Russians are saddled with over $2 billion in Indian currency, which they are unable to utilise. Besides, it’s becoming difficult for Indian refiners to make payments in US dollars.

Asked if currency issues can impact relationships, Pavlov said “In my view, this looks like a minor issue. After all, there have been even more serious concerns at the beginning of this partnership and they have been overcome rather swiftly.”

As long as there is a fundamental drive behind certain commodity flow, currency issues take a second place. One option might be UAD, which technically is not USD, although it is pegged to it, so it helps Russia save face and gives India an opportunity to continue operations as per usual, he explained.

However, this issue is likely to be resolved as India and the UAE have decided to start trade settlement in their currencies and link their fast payment systems to make international financial interactions simpler.

The pact was signed during Prime Minister Narendra Modi’s visit to the Arab country last week