In a significant development, India’s import of cost-effective Russian oil has reached a new milestone in May 2023. The latest industry data reveals that the quantity of oil imported from Russia surpassed the combined total of oil purchased from Saudi Arabia, Iraq, the UAE, and the U.S.

According to data provided by energy cargo tracker Vortexa, India imported 1.96 million barrels of oil per day from Russia in May 2023. This figure represents a 15% increase compared to the previous record high in April 2023.

The surge in Russian oil imports has resulted in Russia accounting for nearly 42% of India’s total crude oil imports in May 2023. This share represents the highest contribution from a single country in recent years.

This increase in Russia’s share comes at the expense of traditional Middle Eastern suppliers. Shipments from Saudi Arabia declined to 560,000 tonnes, marking the lowest volume since February 2021, as reported by shipping analytics companies.

India’s reliance on the Organization of the Petroleum Exporting Countries (OPEC) for oil imports has also decreased. OPEC’s share in India’s oil imports hit an all-time low of 39% in May 2023. In the past, OPEC countries, mainly located in the Middle East and Africa, accounted for up to 90% of India’s crude oil imports. However, this has been steadily declining since the availability of discounted Russian oil following Moscow’s invasion of Ukraine in February 2022.

Russia has maintained its position as the largest supplier of crude oil to India for the eighth consecutive month, supplying 42% of India’s total oil imports.

Crude oil is processed into petrol and diesel at Indian refineries.

The volume of oil imported from Russia now exceeds the combined purchases from Iraq and Saudi Arabia, which were India’s major suppliers over the past decade, as well as the UAE and the U.S. In May 2023, Iraq supplied 0.83 million barrels per day (bpd) of oil, while the UAE shipped 203,000 bpd. The data also indicates that 138,000 bpd was sourced from the U.S.

This significant increase in Russia’s market share in India’s oil imports can be observed by comparing its previous market share of less than 1% before the Russia-Ukraine conflict in February 2022 to the current share of 42% in May 2023, representing 1.96 million barrels per day.

Out of the 4.7 million barrels per day of oil imported by India in May 2023, OPEC supplied 1.8 million bpd. This figure decreased from the 2.1 million bpd imported in April 2023, according to Vortexa.

Indian refiners previously showed limited interest in purchasing Russian oil due to high freight costs. However, they are now capitalizing on the availability of abundant Russian cargo offered at a discounted price compared to other grades. Western nations’ rejection of Russian oil due to the Moscow-Ukraine conflict has contributed to this shift in purchasing patterns.

The volume of oil imports from Russia in May 2023 was more than double the 0.83 million bpd purchased from Iraq, which had been India’s top oil supplier since 2017-18. Consequently, Saudi Arabia has been pushed down to the third position.

Vortexa’s head of Asia-Pacific analysis, Serena Huang, stated, “India’s imports of Russian crude continue to test new highs, reaching almost 2 million bpd in May 2023. Refiners have tested and gained confidence in processing Russian crude, and their voracious appetite for Russian crude is likely to grow as much as they have room to back off spot crude purchases.”

In April 2023, the average cost of Russian crude, including freight costs, was $68.21 per barrel, marking the lowest level since the Ukraine conflict. In comparison, Saudi Arabian crude sold to India in April was priced at $86.96 per barrel, while Iraqi oil was priced at $77.77 per barrel. The import price for May has yet to be released.

Russia has significantly increased its crude oil sales to India to offset the decline in its energy exports following the EU’s ban on Russian seaborne oil in December 2022. Additionally, the EU imposed a $60-per-barrel price cap, which restricts other countries from using EU shipping and insurance services unless they sell oil below the cap.

Industry officials have revealed that Indian refiners are utilizing the UAE’s dirham currency to pay for oil imports priced below $60.

In March 2022, India imported just 68,600 bpd of oil from Russia, highlighting the substantial growth in imports since then.