India's Venezuelan crude imports are set to significantly increase in October, potentially reaching their highest levels in nearly seven years. This surge is driven by Indian refiners seeking more affordable oil options as Russian crude becomes more expensive and carries increased sanctions-related risks.
Kpler estimates project Venezuelan crude deliveries to India at approximately 465,000 barrels per day (bpd) this month, a substantial jump from 196,000 bpd in September. If these scheduled shipments arrive on time, October's volumes would mark the highest since December 2019. However, Kpler senior manager Sumit Ritolia cautions that actual deliveries might average closer to 350,000 bpd, acknowledging potential delays in vessel discharge.
Strategic Shift to Venezuelan Crude
All current Venezuelan oil cargoes destined for India are headed to Sikka port in Gujarat. This port serves Reliance Industries' massive Jamnagar refinery complex, which is the world's largest refining hub. Ship-tracking data indicates at least two tankers are expected to arrive on India’s west coast by October 31.
India recommenced importing Venezuelan oil in February, ending an almost year-long hiatus that followed the easing of U.S. sanctions restricting Venezuela's crude exports. This renewed flow is crucial as Indian refiners re-evaluate their reliance on Russian crude.
Russian Crude Costs and Diversification Efforts
While Russia remains India's primary crude supplier, its market share in India dropped from a peak of 56% in July to about 35% in September, according to Kpler data. Concurrently, prices for Russian Urals crude have risen, with Baltic-loading prices reaching their highest point since the Ukraine war began. Indian refiners are also growing more wary of Russian purchases due to the potential for new U.S. sanctions and tariffs.
"Venezuelan crude has become an increasingly important part of India’s diversification since the start of the year," stated Sumit Ritolia. Venezuela's flagship Merey crude is particularly appealing due to its discount compared to Russian Urals. This price advantage helps offset the longer shipping distance and higher transportation costs from Venezuela to India.
"Venezuelan crude has become an increasingly important part of India’s diversification since the start of the year."
Sumit Ritolia, Kpler Senior Manager
Merey crude is a heavy, high-sulfur grade, making it more challenging to process than lighter oils. However, Reliance's Jamnagar complex is equipped with advanced refining capabilities designed to handle such complex crude grades effectively.
Despite the current surge, the sustainability of high import volumes could face limitations. Factors such as increased tanker rates and the restricted ability of many Indian refineries to continuously process large quantities of heavy crude may act as constraints. Ritolia noted, "These barrels are relatively difficult, heavy barrels, and not every Indian refinery can process them continuously or in large proportions."