India's Saudi oil imports jump as Riyadh looks to claw back share lost to Russia

Highlights:

• India's crude oil imports showed a sequential recovery in September as refineries undergoing maintenance are set to resume operations in October.
• This recovery was largely driven by increased imports from Saudi Arabia, which lowered its prices to regain market share, and continued strong imports from Russia, India's largest source of crude oil.

Factors Influencing Import Recovery

Refinery Maintenance and Future Demand:

• India's oil demand softened in August due to the upcoming peak refinery maintenance season in September.
• With refineries expected to return to operation in October, there was a notable increase in import volumes in September.
• The maintenance season's end is expected to drive higher import volumes in October to meet festival season fuel demand.

Saudi Arabia's Market Strategy

Increase in Imports:

• Imports from Saudi Arabia rose by 39.8% month-on-month to 0.73 million barrels per day (bpd) in September, the highest since March.
• Saudi Arabia had been losing market share due to higher oil prices compared to Russia and Iraq.
• In June, Saudi oil imports hit a multi-year low of 0.42 million bpd.

Competitive Pricing:

• Riyadh is attempting to reclaim market share by offering lower prices.
• Market analysts expect continued increases in Saudi oil imports if prices remain competitive for Indian refiners.

Russian Oil Imports

Continued Growth:

• Russian crude imports increased by 6.4% in September, reaching 1.88 million bpd and accounting for 40.2% of India's total crude imports.
• Indian refiners are likely to sign larger term deals with Russia for the coming year due to competitive pricing.

Impact on Other Suppliers

Increased Competition:

• Saudi Arabia's aggressive pricing could lead to better deals from other suppliers like Russia and Iraq.
• Iraq, the second-largest source, supplied 0.87 million bpd, accounting for 18.7% of India's imports.
• Saudi Arabia's market share increased to 15.5% in September from 11.7% in August.

Historical Context

Pre-Ukraine War:

• Prior to the Ukraine conflict, Iraq and Saudi Arabia were the top suppliers to India.
• Post-invasion, Russia offered discounts on crude, which Indian refiners capitalized on.

Economic Sensitivity:

• As the world's third-largest crude oil consumer with over 85% import dependency, India is highly sensitive to oil prices.
• Despite shrinking discounts on Russian oil, high import volumes still lead to significant savings.

Other Notable Imports

United Arab Emirates:

• UAE, the fourth-largest supplier, saw a 18.6% increase in imports to 0.49 million bpd in September.
• The rise is attributed to Indian refiners' growing preference for UAE’s Murban crude, which blends well with Russia’s Urals crude.

Prelims Takeaways:

• India-UAE Relations