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March 4, 2024
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India to forego Russian ESPO crude purchase in September as freight costs jump

Due to higher freight costs, Indian refiners plan to forego purchases of Russian ESPO crude oil this month and will instead turn to the Middle East and Africa, according to industry sources.

Due to higher freight costs, Indian refiners plan to forego purchases of Russian ESPO crude oil this month and will instead turn to the Middle East and Africa, according to industry sources.

Since Moscow’s invasion of Ukraine in late February, India, which in the past rarely purchased Russian oil, has surpassed China as Moscow’s second-largest oil customer.

After some Western companies stopped buying, refiners in India have been buying almost all grades of Russian crude at reduced prices.

However, higher prices are set to cool off Indian demand, channeling supplies to China.

“On netback basis after factoring in the freight, the landed cost of ESPO is turning out to be $5-$7 a barrel costlier in comparison to similar grades from other countries such as UAE’s Murban,” said an Indian industry source familiar with the matter, adding that Russian oil has previously been cheaper.

Due to higher freight costs, Indian refiners plan to forego purchases of Russian ESPO crude oil this month and will instead turn to the Middle East and Africa, according to industry sources.

Due to higher freight costs, Indian refiners plan to forego purchases of Russian ESPO crude oil this month and will instead turn to the Middle East and Africa, according to industry sources.

Since Moscow’s invasion of Ukraine in late February, India, which in the past rarely purchased Russian oil, has surpassed China as Moscow’s second-largest oil customer.

After some Western companies stopped buying, refiners in India have been buying almost all grades of Russian crude at reduced prices.

Due to planned maintenance shutdowns of units at some refineries run by businesses like Indian Oil Corp., Reliance Industries, Bharat Petroleum, and Nayara Energy, India is expected to import less crude overall in September.

According to Ehsan Ul Haq, an analyst with Refinitiv, Middle Eastern producers also reduced the official selling prices for their supplies in October, hurting demand for Russian oil.

Middle Eastern crude arrives in a week, whereas supplies from Russia to India take about a month, he added.

All but one of the seaborne ESPO cargo items for the September departure are traveling to China, according to ship-tracking data from Kpler.
According to the data, Russian ESPO exports in September decreased to 720,000 barrels per day (bpd) from over 800,000 bpd in July and August.

“ESPO from the Far East is a short-haul journey for China and freight rates have also risen. So China is taking more oil from the Far East and not so much from Baltic or Black Sea ports,” Haq said.

Russia’s local crude processing has also increased, curtailing supplies for export, he said.

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