Russian oil supply to India tightens on reduced exports, strong Chinese demand

• China is outbidding Indian refiners by booking cargoes in advance and paying firmer prices, while also benefiting from cheaper, more secure Arctic Northern Sea Route shipping versus India's riskier Red Sea route
• Russian export capacity has contracted significantly, with Black Sea port Novorossiysk shipments falling roughly 50% due to repeated drone attack disruptions
• Indian refiners are replacing Russian Urals crude with pricier alternatives including UAE Murban, Iraqi Basrah, and Angolan cargoes for the remainder of 2024

Russian Oil Supply to India Tightens Amid Export Constraints and Chinese Competition

Indian refiners are facing tighter Russian oil supplies in October and November due to reduced exports and intensified competition from China, forcing India to seek more expensive alternatives for the remainder of 2024.

Key Developments:

• Russian oil arrivals to India are expected to drop to approximately 1.75 million barrels per day (bpd) in September, the lowest level since April
• August imports already declined 16.5% to about 2.1 million bpd from July, though Russia remains India's primary supplier
• China, the world's top crude importer, has increased Russian oil purchases as Middle Eastern supplies tightened, demonstrating willingness to book cargoes in advance and pay higher prices

Supply Constraints:

Russian export availability has contracted significantly, particularly from the Black Sea port of Novorossiysk, where shipments have fallen by roughly 50% due to repeated drone attack disruptions and loading suspensions.

Market Implications:

Indian refiners are turning to costlier replacement barrels, including:

• UAE Murban crude (a close substitute for Russian Urals grade)
• Iraqi Basrah
• Angolan cargoes

Shipping Dynamics:

Transportation routes are influencing trade flows. Russia's Arctic Northern Sea Route provides secure, cost-effective access to China, while shipments to India via the Red Sea face heightened security risks from Yemen's Houthi-related conflicts. Freight costs via the Arctic route to China are now comparable to Suez Canal shipments.

Bottom Line:

India, the world's third-largest crude importer and previously the top buyer of seaborne Russian Urals since 2022, must now compete more aggressively for Russian supplies or absorb higher costs from alternative sources, potentially impacting refining margins.