India is increasing its purchases of Russian oil amid falling prices

Indian oil refiners are purchasing record volumes of Russian oil amid falling crude prices and a decline in supplies from the Middle East. Last month, more than 2.3 million barrels of Russian oil arrived at Indian ports daily. In July, shipment volumes have so far remained close to that level.

This represents a significant increase compared to the near-zero import volumes prior to Russia’s full-scale invasion of Ukraine in 2022. The increase in purchases is also helping to reduce Russian oil stocks held at sea.

Exports from some of Russia’s largest producers remain subject to U.S. sanctions, but this does not seem to be deterring buyers. When the restrictions were imposed late last year, it was expected that supply volumes would drop sharply. Instead, the use of intermediaries has allowed exports to grow.

The flow of Russian crude coincided with a decline in supplies from the Persian Gulf. Exports from the Middle East—the world’s key oil-producing region—fell sharply again after brief signs of recovery linked to a temporary peace agreement between the U.S. and Iran.

However, the agreement collapsed within a month, leading to a resumption of Iranian attacks on ships in the Strait of Hormuz and a renewed naval blockade by the U.S. Recent threats by Yemen’s Houthis to attack ships entering Saudi ports have also jeopardized shipments from Red Sea ports, which have become an important alternative to flows from the Persian Gulf.

The average volume of Russian crude oil shipments by sea over the past four weeks remains close to the record high recorded earlier this month. According to Bloomberg, in the period ending July 19, it fell for the second consecutive week—to 4.16 million barrels per day.

Ukraine’s continued attacks on Russian oil refineries are likely diverting some of the crude that cannot be processed domestically toward export. This is increasing Russia’s exports even as production declines.

Last week, Ukrainian drones attacked the Yaroslavl Oil Refinery (YANOS), which has a capacity of 300,000 barrels per day. The wave of strikes reduced the utilization rate of Russian refineries to their lowest level in more than 21 years, exacerbated the domestic fuel shortage, and forced Moscow to approve import subsidies.

Indian buyers may also have been attracted by cheaper Russian crude, whose prices have been falling for 13 consecutive weeks (based on a four-week average) and are now slightly more than half of their mid-April peak.

At the beginning of the year, the threat of U.S. sanctions prompted some Indian refiners to adopt a more cautious approach to purchasing Russian crude. Such caution may return: a bipartisan group of U.S. senators plans to bring a bill on sanctions against Russia to a vote in the near future.

The bill calls for imposing tariffs of up to 100% on the five largest buyers of Russian oil and gas, including India.

In the week leading up to July 19, 37 tankers loaded 27.73 million barrels of Russian oil. A week earlier, according to revised data, 36 vessels loaded 27.51 million barrels.

Based on the four-week average, the gross value of Russian exports for the 28 days leading up to July 19 fell to $1.54 billion per week. This is $40 million less than the figure for the period ending July 12. The decline in shipment volumes, combined with falling prices for Russian oil, led to a reduction in the value of exports.

The price of Urals crude from the Baltic region fell by approximately $0.50 to $48.27 per barrel. The Black Sea price fell by $0.60 to $47.78 per barrel. At the same time, the price of Pacific ESPO rose by $0.20 to $63.69 per barrel.

The price of shipments to India fell for the 13th consecutive week to $65.28 per barrel, the lowest level since mid-March.