Shipping costs now dictate oil sourcing for India, the world’s third-largest oil importer. According to Asharq Business, rising freight costs have made Russian crude less viable. Meanwhile, Gulf producers are offering deep discounts to absorb these shipping burdens.
Iraq Drives Import Volume Growth
Iraq has been a primary driver of this trend.
| Oil Source | September Import Share/Volume | August Import Share/Volume |
|---|---|---|
| Middle East (Total) | ~54% | 32% |
| Russia (Share) | 33.5% | 46.6% |
Russian Crude Loses Price Edge
Russia remains the single largest supplier to India. However, its dominance is slipping.
The price gap that once made Russian oil irresistible has narrowed. It is now just one or two dollars per barrel over Brent. This follows previous months where gaps exceeded 10 dollars.
Logistics also work against Moscow. Russian barrels often arrive on a Delivered Ex-Ship (DES) basis. This limits the ability of Indian buyers to manage shipping costs. Shorter maritime distances from the Gulf make those shipments more attractive when priced competitively.
The Indian government maintains its energy strategy is independent. The Indian Oil Minister stated on Tuesday that the country is not facing any pressure from the United States to reduce its imports of Russian crude.
State Refiners Pivot to Gulf
Indian Oil Corporation (IOC) reportedly purchased two million barrels of Basra crude. The discount was nearly $28 per barrel relative to the Dubai benchmark.
Executives at other state firms have weighed in. These include Bharat Petroleum and Hindustan Petroleum. They indicated that imports from Russia will decline through October and November. Gulf discounts better offset high freight rates.
The return to Middle Eastern supplies reverses a previous trend. During earlier periods of regional conflict, Indian refineries relied heavily on Russian crude to compensate for disruptions in the Gulf.
Competitive advantage has returned to the Middle East. This follows increased flow through the Strait of Hormuz and steep pricing incentives.