Indian refiners are considering scaling back their purchases of Russian crude oil for November deliveries, a move prompted by a new US sanctions law that heightens the risk of tariffs on nations importing Russian energy.
India, the world's third-largest crude oil buyer, has significantly increased its reliance on Russian oil in recent months, sourcing over half of its imports from Russia to mitigate high global prices and supply uncertainties from the Middle East. However, industry sources indicate that major Indian refiners have begun actively exploring alternative suppliers.
US Sanctions and Tariff Implications
The new US legislation, enacted last week, grants the President authority to impose tariffs on countries that purchase Russian crude. India, currently the largest buyer of Russia's seaborne oil, has previously faced similar tariff threats, which were later withdrawn. The law permits the imposition of tariffs, potentially up to 100%, within 30 days on goods from major buyers.
This development comes as Russian crude imports into India have already seen a decline, averaging approximately 1.9 million barrels per day in September. This figure represents over 35% of India's total imports but marks the lowest level since April, according to data from Kpler.
Challenges and India's Stance
Replacing Russian crude presents considerable challenges for India due to the sheer volume of its purchases and significant price differences. Last week, Russian Urals crude delivered to India was priced around $133 a barrel, while Middle Eastern grades such as Oman and Murban were notably higher. The situation is further complicated by ongoing disruptions in the Strait of Hormuz, which continue to impact global crude markets.
Simultaneously, India's domestic oil demand is on the rise. A new refinery in Rajasthan and expansions at existing plants are projected to push the nation's crude purchases towards a record 5.4 million barrels per day.
Negotiations for November Russian crude typically commence in late September, overshadowed by uncertainty regarding how the US will enforce its new law. New Delhi is also closely monitoring whether these measures will be extended to other major buyers of Russian energy, including China.
While India has previously adjusted its Russian oil imports in response to US pressure, the government maintains that its energy procurement decisions are primarily driven by the imperative to secure affordable energy for its vast population of 1.4 billion.