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The recent US waiver allowing India to purchase Russian oil that is already en route will provide some immediate relief to Indian refiners who are facing a supply shock in the Middle East, where nearly half of their crude imports come from. This move, announced by Washington last week, grants New Delhi a one-month exemption to buy Russian crude that was loaded on vessels before March 5. Analysts at Nomura estimate that this could make 20 million to 30 million barrels of oil available to India.
While this may seem like a significant amount, it is actually only a fraction of India’s daily demand and is unlikely to be a game-changer for the country. Energy Aspects, a data intelligence company, reported that India purchased about 20 million barrels of Russia’s on-water crude immediately after the US announced the temporary waiver. This move helps clear Russian crude and delays upstream shut-ins, but it does little to offset the global supply shock.
President Donald Trump had previously imposed a 25% additional tariff on Indian imports, citing concerns that New Delhi’s oil purchases were supporting Moscow’s actions in Ukraine. However, Trump recently agreed to drop the tariffs after India committed to “stop buying Russian oil.” India has maintained that its strategy is to diversify its oil supply in accordance with market conditions.
Despite the access to Russian shipments, India is still feeling the impact of higher oil prices, with Brent crude reaching as high as $119 per barrel. The country relies on imports for 90% of its oil and natural gas needs, spending around $100 billion on crude imports between April and January.
Premasish Das, S&P Global’s head of Asia and the Middle East oil markets research, stated that the US waiver does not significantly mitigate the risks to India’s oil supply, as the flow of crude through the vital Strait of Hormuz remains severely disrupted. This waiver is seen as a short-term, tactical move to prevent disruption and stabilize markets rather than a meaningful supply boost.
Indian oil refiners have seen their share prices plummet in response to the soaring global oil prices and the disruption in shipping through the Strait of Hormuz, a key route for Indian crude imports. The largest domestic refiner, Indian Oil, has seen its share price drop by about 15% since the conflict began.
India’s strategic reserves can cover approximately eight weeks of imports, providing some buffer against price shocks. However, experts like Shilan Shah of Capital Economics emphasize the need for concerted action by major powers to increase the flow of oil into the market. Anindya Banerjee, head of commodity research at Kotak Securities in Mumbai, believes that while the barrels may eventually be obtained, they will come at a substantial premium due to the ongoing crisis.
As India navigates the challenges posed by the conflict in the Middle East and the impact on global oil markets, it remains to be seen how the country will adapt its oil import strategy in the face of continued uncertainty.
