Indian refiners may skip buying Russia’s ESPO blend of crude oil in September, apparently due to high freight charges.
India imports a mix of crude grades from Russia, namely the Urals, Siberian Light, CPC blend, and ESPO crude. However, the share of ESPO crude is smaller in the mix.
Importing ESPO crude oil is costing $5-$7 a barrel more than similar grades from other countries such as UAE’s Murban grade, Reuters reported yesterday (Sep. 22) quoting industry sources.
The Indian refiners’ move comes two days after India publicly indicated its opposition to the Ukraine invasion.
Before the Russia-Ukraine war broke out in February, India barely bought crude oil from Russia. However, given the deep discounts offered by Russia since then, India, one of the world’s largest importers of crude oil, began snapping up nearly all the grades offered by Moscow.
What is ESPO crude blend?
ESPO crude oil is a light variant crude, produced by Russia’s Rosneft. It is shipped through the East Siberia-Pacific Ocean (ESPO) pipeline system and sold to the east Asian and the US’s west coast markets.
Russia’s Urals grade, on the other hand, is mostly sold to European countries.
In July, India imported 666,000 barrels per day (bpd) of Urals crude, according to Kpler data, much more than the 145,000 bpd of ESPO crude it bought.
Overall, Russia’s ESPO exports have slipped from more than 800,000 bpd in July and August to 720,000 bpd in September, the Kpler data showed.
India’s alternatives to Russian crude
One reason for Indian refiners skipping ESPO crude might be rising inflation. They are turning to other oil-exporting regions like Africa and west Asia, industry sources said.
The overall share of African crude oil has increased considerably this month. India alone has loaded 2.35 million tons of it so far this month, in comparison to 2 million tons of Russian crude, Refinitiv data showed.
West Asian oil producers are lapping up this opportunity, too. For instance, Saudi Arabia slashed its selling prices in October.
Besides, west Asian oil is better for India.
While supplies from Russia take about a month to arrive, West Asian crude arrives in a week, according to Ehsan Ul Haq, an analyst with Refinitiv.
Notably, though, some refineries of IndianOil Corp, Reliance Industries, Bharat Petroleum, and Nayara Energy have reduced intake this month, primarily due to planned maintenance shutdowns.