Russia’s bumped-up oil exports to India are here to stay as the two are building a long-term relationship based on cheap prices, according to a top Kpler analyst.
The shift in flows of Moscow’s crude exports to the Asian country will stick as it’s to the benefit of both sides, Viktor Katona told Insider.
“The entire India-to-Russia story is a long-term story, which will not suddenly stop. It’s going to be a new kind of feature of the market,” said Katona, the lead crude oil analyst at commodities intelligence firm Kpler.
While China is the top importer of Russia’s crude, Moscow has a keen interest in keeping its foot in the door with India. The country’s refiners have become an increasingly important market for it after the G-7 countries imposed a price cap and other sanctions meant to crush Russia’s energy revenues funding its war in Ukraine.
Even if the Ukraine war ends, Katona thinks the discounts will almost certainly remain in place — and the prices might get cheaper from where they are now. India is paying about $10 to $12 dollars below the price for global crude benchmark Brent futures, he estimates.
“Russian oil is now discounted in the long term. So yes, should the war end, India would still be buying, because it’s the discounts making it interesting for them,” he said.India
bought almost no Russian crude oil one year ago, but has been snapping up record amounts of crude at discounted costs this year after other countries backed away from Moscow.
The country is also gradually buying new energy products — like diesel — from Russia that it hasn’t in the past. It’s a signal of an even stronger trading relationship between the two.
“India is not only buying Russian oil, it’s also buying Russian products. It’s kind of expanding the scale of what it buys, so it’s not just one thing that it used to buy, but it’s gradually picking up new things as it moves along the way,” Katona said.
“The interaction between these two countries will be much longer than the naysayers might assume, because there’s a mutual interest in having it longer,” he added.
Moscow prefers to sell its crude to India rather than China — and not just because it’s a much longer distance when redirecting barrels that used to ship to Europe.
A key reason is that Indian companies pay on a delivered basis, meaning they don’t handle the shipping and insurance. Russia can maximize its profits for the whole transaction in its charges for those extras. Chinese purchasers, in contrast, might insist on using their own fleets, Katona said.
Plus, he pointed out that big Russian companies don’t have equity in China, while they do have ownership stakes in Indian refiners.
In January, Russia sent almost 2 million barrels of crude a day to India, not far behind China’s nearly 2.5 million, according to Kpler data. Its number three importer is on the edge of the Asia market — Turkey, well behind at around 400 thousand barrels a day.
But the overall volume of crude flowing across the seas is more or less the same, data show.
“In a sense, it’s not much of a change, because it’s only a reshuffling of what was flowing where initially. Europe was buying this. Now India is buying this. It’s taken on a longer route, but it’s also more discounted,” Katona said.
“It’s a game of musical chairs rather — Russia pushes out Saudi Arabia from India, so Saudi Arabia sells more to China,” he said.
That said, the switch still feeds into a larger narrative, that Asia has been given a competitive advantage in the global oil market.
India and China, the economic powerhouses of the region, are both buying crude below market levels. Meanwhile, importers in Europe and the US have to pay full price.
That means there’s a “slackening Atlantic basin” for crude shipments, according to Katona. Meanwhile, a resurgent Asia — where China has reopened its economy by lifting strict pandemic restrictions — is bent on maximizing its profit and is more aggressive going into the market.
Whether it’s China trading with fully-sanctioned Iran and Venezuela, or India buying from halfway-sanctioned Russia, both players are keen on taking on risks, Katona said.
Zinya Sanifiti [Business Insider]