Indian refiners expect Russian crude supplies to tighten further in October and November as lower export availability and stronger Chinese demand increase competition for barrels, pushing buyers toward more expensive alternatives.
MONTREAL (Oil Monster): Indian refiners expect supplies of Russian crude to tighten further in October and November as reduced Russian exports and stronger demand from China intensify competition for available cargoes.
The shift is expected to force India, the world's third-largest crude importer, to purchase more expensive alternative grades during the remainder of the year, according to trade sources familiar with refinery procurement plans.
India has been the leading buyer of seaborne Russian Urals crude since 2022, when Moscow redirected large volumes away from Europe and offered its oil at discounts to attract new buyers.
More recently, Chinese refiners have increased purchases of Russian crude as supplies from the Middle East tightened amid regional conflict.
Trade sources said some Indian refiners are unlikely to receive all of the Russian volumes they are seeking for October and November.
"Demand from China has been really high. They were willing to book cargoes in advance and to pay firmer prices compared to Indian refiners," a source involved in Russian crude sales told Reuters.
Russian oil arrivals in India are expected to average approximately 1.75 million barrels per day in September, according to analytics firm Kpler.
That would mark the lowest level since April.
Russian crude imports had already declined by 16.5% in August from July, falling to approximately 2.1 million bpd, trade data showed.
Despite the decline, Russia remained India's largest crude supplier.
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Overall Russian export availability has also declined.
The tightening has been particularly pronounced at Russia's Black Sea port of Novorossiysk, where crude shipments have fallen by roughly half as repeated drone attacks disrupted loading operations.
Lower availability from the Black Sea has reduced the number of cargoes accessible to Indian refiners at the same time that Chinese demand for Russian barrels has increased.
Indian refiners are responding by seeking replacement supplies from the Middle East and West Africa.
Traders said buyers have been looking for UAE Murban crude, which has characteristics that make it a potential alternative to Russian Urals for some refinery configurations.
Indian refiners are also purchasing Iraqi Basrah grades and Angolan crude.
These replacement barrels are generally more expensive than the Russian crude India has relied on heavily in recent years.
Shipping conditions are also influencing the shift in Russian crude flows.
Seasonal navigation along Russia's Northern Sea Route is providing exporters with a direct Arctic shipping channel to China.
Trade sources said freight costs on the Arctic route are now broadly comparable with the cost of moving Russian crude through the Suez Canal.
The route gives Russian suppliers another option for moving crude to Chinese buyers during the seasonal navigation window.
Shipments headed toward India face a different set of logistical risks.
Tankers using routes through the Red Sea continue to face heightened security concerns linked to attacks by Yemen's Iran-aligned Houthis.
For buyers, the reliability of a cargo's delivery has therefore become an increasingly important consideration alongside the price of the crude itself.
"It's not so much about the price as ensuring the cargo actually reaches its destination," another trader told Reuters.
The combination of reduced Russian availability, stronger competition from Chinese buyers and elevated shipping risks is narrowing the range of inexpensive crude available to Indian refiners.
Purchasing more Murban, Basrah and West African crude provides alternative supply, but those barrels can carry higher acquisition and transportation costs than discounted Russian Urals.
The development adds another layer of pressure for Indian refiners already managing volatile crude prices and disruptions affecting several major supply routes.
Supply Shift: Russia remains an important source of crude for India, but the September decline to about 1.75 million bpd and expectations for tighter October-November availability are increasing the value of supply diversification.
Competition: Chinese refiners are competing more aggressively for Russian cargoes, reducing India's ability to rely on the same volumes and pricing conditions available earlier in the year.
Refinery Impact: Replacement grades are available, but Indian refiners may have to accept higher crude and freight costs to maintain throughput.
Courtesy: www.reuters.com
