India Cuts Russian Oil Imports, Brent Drops to $110

A retreat to $100.96 in crude oil and to $110.12 in Brent crude reflected selling pressure that accompanied the decision of Bharat Petroleum Corporation Limited (BPCL), one of India's largest state refiners, to cut Russian oil imports. Trading in a band of $100.60 to $102.63 during the day, crude oil recorded a daily drop of 2.24%, while the loss in Brent crude, which fluctuated between $109.25 and $111.20, was 1.41%. The natural gas price dropped 1.64% to $3.00. High energy prices globally are priced in Turkey's markets directly through the energy import bill and the current account balance channel.

Why did India reduce its Russian oil purchases?

BPCL Chief Financial Officer Vetsa Ramakrishna Gupta stated during an earnings call with analysts that they would significantly reduce crude oil purchases from Russia in November due to high freight expenses and cargo premiums. Gupta said that Russian crude accounted for a 37% share of the company's total supply in the quarter covering the July-September period, but rising shipping costs made Middle Eastern cargoes commercially more advantageous. Indicating that purchases could recover toward the end of the year, Gupta reported that the Russian oil premium, which reached up to $13 per barrel on October cargoes, dropped to $1 to $2 for December deliveries.

Across India, refiners are seen curbing Russian oil due to rising costs and turning to Middle Eastern crude, whose flow through the Strait of Hormuz has expanded. India's crude oil imports from the Middle East rose 32% month on month in September to reach 2.8 million barrels per day, marking the highest level since February. Although Russia remained the country's top supplier, shipments from Russia dropped 14% from August, retreating to 1.8 million barrels per day. As a result, the share of Russian oil in India's imports fell from 46.6% to 33.5%.

How did competition with China affect oil prices?

China's pivot to Russian crude oil after its access to Iranian oil was severed sparked direct competition between India and China, driving Russian cargo prices higher. Indian refiners continue to favor Middle Eastern cargoes whenever supply allows, benefiting both from the freight advantage of the short sea route stretching from the Gulf of Oman to India and from competitive pricing.

This content is for information purposes only and does not constitute investment advice.