India has gone on a record-breaking buying spree and is set to source more than 50 per cent of its monthly crude oil imports in June, around 2.5 million barrels per day, from Russia, underscoring just how central discounted Russian crude has become to India’s energy security.
Eight tankers carrying Russian crude are either docked at, or about to enter, Indian ports stretching from Vadinar on the west coast to Visakhapatnam in the east.
“I’ve never seen so many tankers carrying Russian crude at Indian ports as I’m seeing right now,” said Anas Alhajji, chief economist at NGP Energy Capital Management.
Since Western sanctions following Russia’s invasion of Ukraine in 2022, Moscow has redirected much of its oil exports to Asia, with India emerging as one of its biggest customers. Before the war, Russian crude accounted for less than 1 per cent of India’s imports. Today, it is by far India’s largest supplier, helping the country curb import costs despite volatile global energy markets.
The buying spree is expected to continue over the coming months, ensuring there is little risk of crude shortages even if Middle East tensions remain elevated.
One reason is that Russian exports have surged after Ukrainian drone attacks disrupted several Russian refineries, forcing Moscow to ship more crude overseas rather than refine it domestically.
“Ukrainian attacks continue to constrain Russian refining,” said Sumit Ritolia, senior analyst at data and analytics firm Kpler.
At the same time, China’s appetite for crude has weakened due to a slowing economy, leaving more Russian barrels available for India. Chinese imports have fallen by roughly one-third in recent weeks, from about 15 million barrels per day to around 10 million.
“With Chinese buying still subdued, a larger share of these Russian barrels has been redirected to India,” Ritolia said.
India is believed to be securing discounts of between $2 and $5 a barrel on current Russian purchases. Refiners are already fully stocked for all of July and the first half of August, meaning purchases now are largely for deliveries beyond that period.
India energy security in focus
Despite this comfortable short-term position, analysts warn that India’s long-term energy security remains fragile.
According to an Ernst & Young study, India has strategic petroleum reserves covering only 4.9 days of crude oil consumption. That’s among the lowest levels of any major economy.
By comparison, China holds reserves equivalent to 92.2 days of consumption, Japan has 77 days and South Korea around 31 days.
“India’s strategic oil inventories cover 4.9 days of consumption, significantly lower than other major economies,” the study said.
It added that, given India’s dependence on imported fuel, fertilisers, food and rare earths, the country should expand its strategic reserves to reduce its vulnerability to supply disruptions and sharp price swings.
“This limited buffer lowers India’s energy resilience, reducing the country’s ability to manage prolonged supply disruptions or sharp global price movements,” the report warned.
India’s dependence on imported oil is also becoming increasingly heavy and harder to reverse.
In 2000, India consumed around 2.5 million barrels of oil a day and imported roughly 70 per cent of its needs. Today, demand has more than doubled to between 5.4 million and 5.6 million barrels per day, while import dependence has climbed to a massive 90 per cent as domestic production has steadily declined.
Although about a quarter of those imports are refined in India and re-exported as petroleum products, the country’s underlying dependence on overseas crude continues to grow. For now, abundant discounted Russian supplies are helping cushion that vulnerability. But India’s exposure to global supply shocks remains considerable, leaving it heavily reliant on international markets and on Russia’s ability to keep supplying substantial amounts of oil.
In fact, it could be said that Ukraine’s repeated drone attacks on Russian refineries have worked in India’s favour and forced Moscow to export more crude oil instead of refining it at home. That has increased the amount available to India.
Russia has been obliged to divert record amounts of unprocessed crude onto export markets, even as parts of the country contends with shortages of petrol and diesel.