Red Sea threats unlikely to deter Russia's dominance as India's top crude supplier: S&P GCI

New Delhi [India], January 8 : Despite recent Red Sea attacks raising concerns over potential diversions and increased shipping costs, Russia's position as India's primary crude supplier is expected to persist in early 2024, according to analysts and trade sources.
According to S&P Global Commodity Insights (GCI), India's resilient demand for Russian crude, constituting over 35 per cent of its total imports in 2023, remains steadfast.
While a slowdown in Russian flows has been noted due to payment hurdles and logistical delays, industry experts believe this won't significantly impact the long-term trend.
"India's demand for Russian crude remains resilient despite Red Sea threats, with no known diversions seen so far. However, there is expectation that the US and Latin American crude volumes may opt for the Cape of Good Hope shipping route," said Sumit Ritolia, refinery economics analyst at S&P Global.
S&P Global data reveals that Russia contributed 1.7 million b/d to India's crude imports in 2023.
Although December saw a decline in Russian crude imports to 1.43 million b/d, there have been no known diversions despite the Red Sea threats.
Analysts suggest that while the Cape of Good Hope route may be explored for other crude volumes, the Red Sea route remains the preferred option for Russian oil destined for India.
"With the situation in shipping from the Red Sea not improving and adding to the risks, oil prices could go higher. India was benefiting from the discounted Russian oil but in the current circumstances, while there are no current diversions, future contracts could be in jeopardy and India might look for alternative supplies from the Middle East," said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis.
The current situation in the Red Sea has prompted discussions about potential disruptions and higher oil prices.
Hardeep Singh Puri, India's petroleum minister, acknowledged the challenges but expressed confidence in India's ability to navigate through the turbulence. He assured that the government is closely monitoring the developments.
"There is no payment problem. India's leadership has only one requirement and that is to ensure that the Indian consumer gets energy at the most economical price, without disruption," Puri said.
A temporary slowdown in Russian crude imports has been observed, particularly in Sokol, as Indian refineries faced issues like extended waiting times for discharge.
The slowdown is attributed to various factors such as increased Middle Eastern flows, weather-related problems at Russian ports, refinery maintenance, and scrutiny of ships carrying Russian oil.
However, it is anticipated that inflows will rebound in the coming months.
Despite challenges like Western sanctions and temporary payment-related issues, Indian government officials deny any substantial payment problems, emphasizing that the drop in imports is more connected to pricing and margin considerations.
Puri highlighted the government's commitment to ensuring an economical energy supply for Indian consumers and dismissed concerns about payment issues.
Puri said, "Crude imports are a pure function of the price at which our refineries buy. Some new oil producers were willing to offer higher discounts than Russia as India has established credentials as a regular oil buyer".
As the situation unfolds, industry experts closely watch the developments, with geopolitical tensions impacting the dynamics of global crude oil trade.