India's reliance on Russian oil may be 'approaching a limit'

India's quality to import much Russian lipid whitethorn person deed a limit, analysts archer CNBC, citing infrastructural and governmental constraints, arsenic good arsenic limitations to Russian lipid flows.

"India volition look to proceed Russian crude imports, but possibly it has reached its limit, hampering immoderate further barrels," according to Janiv Shah, elder expert astatine Rystad Energy.

Since the Kremlin's penetration of Ukraine successful February past year, India's refiners person been snapping up discounted Russian oil.

Moscow has since leapfrogged to go India's starring root of crude oil, accounting for about 40% of India's crude imports.

However, the measurement of crude lipid consumed and processed by India's refineries has present deed a "seasonal peak" and would lone inclination downwards from here, Shah told CNBC successful an email. 

His sentiments were echoed by commodity quality steadfast Kpler, which highlighted that successful summation to refineries being presently shut, request for lipid is acceptable to trickle down too.

"For the archetypal clip this year, immoderate of Indian refiners volition beryllium undergoing attraction which was conscionable not the lawsuit successful January to May 2023 erstwhile determination were nary turnarounds astatine all. Everyone was firing connected each cylinders," said Kpler's pb crude analyst, Viktor Katona.

India's monsoon play started successful aboriginal June, and the summertime play is often associated with little request for lipid products arsenic a effect of little mobility and construction, Katona added.

Fuel request successful India, the world's 3rd largest lipid consumer, usually enters a lull during the four-month monsoon season. India's full lipid request successful June slipped 3.7% month-on-month to 19.31 cardinal tonnes, according to data from India's Petroleum Planning and Analysis Cell.

However, June inactive marked the 10th consecutive month-on-month summation successful India's imports of Russian crude, Kpler's information showed.

"An unprecedented feat successful caller history, particularly fixed the volumes successful question — 2.2 cardinal barrels per time successful June," Katona said.

And that's the highest measurement that India's imports of Russian lipid tin spell — astatine slightest for the remainder of the year, according to his predictions.

"I would accidental 2.2 cardinal b/d volition beryllium the highest this twelvemonth ... We judge India's imports of Russian crude volition spot a flimsy downward correction to 2 cardinal barrels per day. That volition beryllium the sustainable level of buying," helium said.

And it seems the bounds goes some ways.

Flows coming retired of Russia person a "finite limit," said Daniel Hynes, elder commodity strategist astatine ANZ.

"Any further proviso coming retired of Russia … that flows into Asia, I fishy it's done. It's maximum magnitude now," helium added. 

Russian lipid exports fell 600,000 barrels per time to 7.3 cardinal barrels per time successful June — the lowest since March 2021, according to a recent study by the International Energy Agency.

Russia besides pledged to trim its crude lipid exports earlier successful July.

"India has talked astir the inability to truly prime up importantly further cargoes from Russia," Hynes added.

However, that's not to accidental that India's refiners volition not effort to effort for different all-time precocious import of Russian lipid adjacent year, said Kpler's Katona.

"Most astir apt successful the March-to-May play again," helium said, pointing retired that request astatine that clip volition beryllium "unrestricted from the Indian broadside and Russian export availability volition beryllium erstwhile again boosted by refinery turnarounds."

However, India needs to support its narration with different exporters too, particularly cardinal suppliers successful the Middle East.

According to Rystad data, 55% of India's caller seaborne mean sour imports were from Russia, portion imports from the Middle East sank to a "historic debased of 40%."

"India whitethorn beryllium approaching a bounds successful its reliance connected Russian crude, arsenic it would inactive request to unafraid semipermanent proviso agreements with Middle Eastern suppliers," Shah said.

Crude import from the Middle East portion dropped 21.7% to 8.68 kilo tonnes successful June compared to the commencement of the year, information from Refinitiv showed.

Medium sour crude supplies to India thin to travel nether yearly word contracts, which person minimum acquisition agreements.

"Technically, the Indians could beryllium buying more, but they don't privation to antagonize the Middle East excessively much," said Kpler's Katona. "Politics matter, too," helium said. 

However, Indian buyers are peculiarly price-sensitive, and could inactive forsake different countries' crude for Russia's astatine the close price.

"Indian refiners tin ever instrumentality much Russian [crude] astatine the disbursal of different grades, e.g the Middle Eastern ones, if the terms disparity widens," said manager of Refinitiv Oil Research successful Asia, Yaw Yan Chong.

Russian exports to India person soared much than 10 times since February past year, shooting from a pre-invasion mean of conscionable 350,000 metric tonne per period to a post-invasion mean of 4.57 cardinal metric tonne per period from March 2023 onwards, helium said.

Yaw expects India volition inactive prosecute Russian imports astatine elevated levels "for arsenic agelong arsenic Russian [crude] are nether [sanction] and shunned by their accepted European buyers."