India increased its purchases of Russian crude oil in January from already record levels in the previous month. And, astonishingly, the United States has become the largest buyer of refined products, despite Washington’s pleas to the rest of the world not to buy Russian fuel.
India’s purchases of Russian crude shot up to 1.7 million bpd in January, up sharply from 1.2 million bpd. no. daily in December 2022 – which even then was a record buying level.
“People were asking where all the Russian Urals crude could go if Europe wasn’t buying it. When India took 1.2 million barrels a day in December, they said surely India couldn’t buy any more. And in January it it’s already at 1.7 million bpd,” said Victor Katona, lead crude oil analyst at Kpler, a data and analytics firm.
The US has traditionally been a large buyer of a Russian refined product called virgin gas oil (VGO). Now, since they cannot buy VGO directly from Russia, they buy it from Indian refineries run by Reliance Energy and Nayara Energy – and the VGO from these refineries is produced from Russian crude oil.
The US buys 200,000 barrels per day of finished products, mainly VGO, from Reliance. “The largest destination country for Indian products is surprisingly the US. And the largest exporters to the US are Reliance and Nayara,” says Katona.
Reliance and Nayara are the two biggest buyers of Russian crude, but major public sector giants such as IndianOil Corporation (IOC), Bharat Petroleum (BP) and Hindustan Petroleum (HP) have also entered the game. “Everybody’s buying. It’s become a national sport,” says Katona.
This month, Reliance is buying about 600,000 barrels per day from Russia, almost half of the refinery’s total capacity. The Nayara refinery currently processes almost entirely Russian crude oil.
$10 discount for India
About 68 tankers have docked at Indian ports or are about to arrive here. India is believed to be getting roughly a $10 discount in the market. If India gets a $10 discount, refiners could save $10 million per tanker. Ships call at all major ports including Sikka (for Jamnagar), Paradip for IOC, Kochi for BP. Several tankers have also docked or are heading to Mumbai, Mangalore, Mundra, Chennai and Visakhapatnam.
Since the start of the war in Ukraine nearly a year ago, India, calling for dialogue, has ignored Western calls not to buy Russian oil, saying it needs Russian crude to provide energy security for its 1.4 billion people. At the same time, the U.S. is struggling to rebuild its strategic reserves after they were depleted following the imposition of Russian sanctions and efforts to stop OPEC’s price hike, which is driving up prices at U.S. gas stations.
“The charts show that the US is the number one destination in December. The UAE is second and Singapore is third. The US exports an insane amount of VGO,” says Katona.
“If you have an advanced refinery, you can break VGO down to more complex hydrocarbons. It’s an intermediate that’s ideal for making transportation fuels. It’s extremely good for transportation fuels, especially diesel,” notes Katona. “It can also be processed into gasoline.”
Total monthly crude oil demand in India is around 5.4 million barrels per day. So about 30% of crude oil currently comes from Russia. Another 15-20% is from local sources and another 50% from other sources. We have reduced purchases from Saudi Arabia.
India is now the second largest buyer of Russian oil in the world after China – but we are the largest buyer of ship shipments. China receives a large amount through pipelines.
Because of the sanctions, Europe almost completely stopped buying Russian crude oil. Only Bulgaria has an exception and is allowed to buy shiploads of Russian crude oil.
Source: Voices
