India continued to rely on Russia as its primary source of crude oil in January 2024, according to data from the commerce ministry. Russia accounted for nearly a third of all imported crude oil, with a value of USD 4.47 billion. This represents a 41 per cent increase year-on-year and a 14 per cent rise compared to December 2023.
This trend follows a broader shift in 2023, where Russia became India’s biggest supplier, exceeding 30 per cent of its total imports. This dominance is expected to persist in early 2024, as reported by S&P Global Commodity Insights in January, despite ongoing security concerns in the Red Sea. Initially, these concerns did not affect Russian oil shipments. However, recent attacks on oil cargo have forced ships to take longer routes, impacting transportation costs.
Additionally, the rise in Russian oil imports coincides with a decline from traditional suppliers in the Gulf region. Iraq remained the second-largest source in December, followed by a significant drop in supplies from Saudi Arabia (31.3 per cent year-on-year). The United Arab Emirates (UAE) and the United States rounded out the top five suppliers, with the UAE experiencing a slight increase and the US witnessing a sharp decline (91 per cent) compared to January 2023.
Before the Ukraine conflict, Russia only accounted for a marginal 2 per cent of India’s oil imports in fiscal year 2021-22. The substantial price discounts Russia offers post-invasion have been the primary driver of this shift. While these discounts have narrowed from over USD 30 per barrel to USD 4-6 per barrel, India has continued procuring Russian oil despite Western nations’ concerns.
Further, India’s Petroleum Minister, Hardeep Singh Puri, has repeatedly emphasised the government’s focus on acquiring affordable oil from various sources to ensure fuel security and affordability. The total oil import bill for January 2024 saw a slight sequential increase of over 4 per cent to USD 12.04 billion, with minimal year-on-year growth.
In addition, the conflict in Ukraine and tensions in the Red Sea continue to pose risks to market stability, despite the stabilising effect of discounted Russian oil prices, which have remained below the G7-imposed price cap. A recent attack on Russian oil refineries by Ukraine on 13 March caused a 2 per cent rise in crude oil prices.
The combined effect of escalating geopolitical tensions and the OPEC+ decision to maintain reduced production has pushed crude oil prices above USD 85 per barrel. As of 18 March, Brent crude for the May contract is trading at USD 85.88 per barrel, reflecting a modest increase.
