China’s Russian oil demand squeezes supplies for Indian refiners

Indian refiners expect Russian crude supplies to tighten further in October and November as lower exports and growing competition from China force the world’s third-largest crude importer to turn to more expensive alternatives, Reuters reports.

India has been the largest buyer of seaborne Russian Urals crude since 2022, when Moscow redirected energy exports away from Europe and offered deep discounts. In recent months, however, China has increased purchases as supplies from the Middle East have tightened amid the Iran conflict.

Some Indian refiners are expected to receive insufficient Russian crude in October and November, according to people familiar with procurement plans.

“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 the sale of Russian crude said.

Russian oil arrivals in India are expected to fall to around 1.75 million barrels per day in September, their lowest level since April, according to analytics firm Kpler.

Arrivals had already declined 16.5% to about 2.1 million bpd in August from July, according to trade data. Despite the decline, Russia remained India’s largest crude supplier, ahead of the United Arab Emirates and Venezuela.

Overall Russian export availability has also contracted, particularly from the Black Sea port of Novorossiysk, where shipments have fallen by roughly half as drone attacks have repeatedly disrupted loading operations.

Indian refiners have responded by turning to more expensive replacement supplies, traders said. They are seeking UAE Murban crude, a close substitute for Russia’s Urals grade, while also purchasing cargoes from Iraq and Angola.

Shipping patterns have further contributed to the shift in flows. Seasonal navigation along the Arctic Northern Sea Route (NSR) has provided a relatively secure and cost-effective route for Russian crude shipments to China. By contrast, deliveries to India via the Red Sea face heightened security risks linked to the conflict involving Yemen’s Iran-aligned Houthis.

“It’s not so much about the price as ensuring the cargo actually reaches its destination,” a second trader said, adding that freight costs via the Arctic route to China are now broadly comparable with shipments through the Suez Canal.

By Vafa Guliyeva