This report is from this week’s CNBC’s “Inside India” publication. Like what you see? You may subscribe right here.
The massive story
If refineries are the oil business’s youngsters, India’s obtained loads of mouths to feed — and U.S. tariff threats over Russian crude are imperiling a distinctly inexpensive meal ticket.
This week, U.S. President Donald Trump slapped an extra 25% of levies on New Delhi’s exports to the U.S., bringing complete duties to 50%, citing India’s purchases of Russian oil. The White Home chief flagged the difficulty in a CNBC interview on Tuesday: “They’re shopping for Russian oil, they’re fueling the struggle machine, and if they are going to do this, then… then I am not going to be comfortable.”
Regardless of Trump’s tone, “whereas the U.S. is asking India to place strain on Russia, it’s following a delicate method,” Mukesh Sahdev, chief oil analyst at Rystad Vitality, informed CNBC by e mail. “What we’re seeing is that geopolitical pulls are going in opposition to oil fundamentals.”
In any case, India’s Russian purchases are neither sanctioned, nor new: New Delhi beforehand loved the White Home’s blessing to entry Western transport and insurance coverage instruments for crude purchased beneath a value cap that the G7 imposed to concurrently keep away from world provide shocks and dwindle Moscow’s struggle coffers.
Dealing with worldwide criticism, Indian officers have repeatedly defended the nation’s consumption as a matter of nationwide curiosity.
“We are going to purchase from wherever we are able to. Our dedication is to the Indian client,” Indian Petroleum Minister Hardeep Singh Puri informed CNBC’s Dan Murphy in July, noting that again when shopping for seaborne Russian crude was sanctioned in G7 international locations in response to the struggle in Ukraine, “we have been suggested, together with by our associates in america, to please Russian oil, however inside the value cap.”
He added: “In impact, by shopping for from Russia, we are going to [be] serving to the worldwide financial system [stabilize] costs, and subsequently, we contributed to world stability in oil costs.”
If India have been to halt Russian crude purchases as we speak, “world crude costs might bounce to over $200 per barrel for all world shoppers,” a supply inside the Indian petroleum sector informed CNBC’s Emma Graham.
India, the world’s No. 3 oil importer, boasts a refining capability of round 5.2 million barrels per day — together with 1.24 million barrels per day at simply its Jamnagar plant — and the Worldwide Vitality Company expects the nation so as to add one other 1 million barrels per day of demand over a forecast interval to 2030.
These are some massive numbers, so let’s dive into the nitty gritty.
Whereas refineries can change their slates to maximise output of a selected oil product — suppose gasoline, diesel, gas oil — many Indian crops have been optimized to course of high-sulfur (so-called “bitter”) crude, akin to the availability from the close by Persian Gulf… and Russia’s Urals.
However Russia’s bitter crude is loaded in far-away ports within the Baltic and Black Seas, making it a much less advantageous long-haul arbitrage buy within the period previous the struggle in Ukraine.
India nonetheless took the occasional Russian bitter cargo — however examine the common 100,000 barrels per day it imported in 2021 to the 1.796 million barrels per day in 2025 up to now, based on information and analytics supplier Kpler.
The deal reductions provided by Russia, as its historically European shopper base for seaborne crude considerably diminished, made Moscow’s provide nearly irresistible.
As well as, the place most Center Jap barrels include year-long commitments, tied to fastened regional month-to-month sale costs, Russian crude grades have sometimes been bought on a spot foundation — leaving room to haggle on quantity, supply phrases and value.
“Operationally, Indian refiners have tailored their techniques to accommodate these grades, particularly at complicated services designed to extract excessive yields from medium-sour crudes,” Sumit Ritolia, lead analysis analyst for refining & modelling at Kpler, informed CNBC in emailed feedback.
“Changing Russian barrels in full isn’t any simple feat — logistically daunting, economically painful, and geopolitically fraught,” he added, noting that substitutes would squeeze refining margins and finally sting the underside line.
That is unhealthy information in Mumbai, the place the Reserve Financial institution of India has been making an attempt to stave off inflation with out stifling financial progress. A spike in power prices — the likes of which significantly troubled European nations shortly after they decoupled from seaborne Russian provides — might burden that mission.
However the inconvenient is not the not possible.
Two oil buying and selling sources, who spoke to CNBC anonymously due to the sensitivity of the matter, stated Indian refiners have launched a “flurry” of tenders to purchase spot crude.
A 3rd buying and selling supply stated that, when the inducement of Russian value reductions is that this enticing, India and China are unlikely to surrender the availability – and that, finally, Chinese language refiners might soak up extra of the Russian consumption that India not consumes, in flip releasing up extra West African crude for Indian refinery, redirecting flows.
“You will need to be aware that crude from the Center East is often bought on time period contracts, therefore there won’t be a lot flexibility to buy further volumes on a immediate foundation. As such, India might buy extra crude from West Africa (WAF) and South America,” Ivan Mathews, head of APAC evaluation at analytics agency Vortexa, echoed in emailed feedback. “Given the escalating tariffs imposed by the U.S. on India, it stays to be seen whether or not India will import extra crude from the U.S. as a part of commerce negotiations.”
Most U.S. crude, because it occurs, is of the low-sulfur (“candy”) selection. India took about 285,000 barrels per day of U.S. oil over January-July, based on Kpler information.
We’re about to see whether or not India finds Trump’s chew any extra spectacular than his bark and halt consumption of Moscow’s crude altogether — although an OPEC+ delegate, who spoke anonymously due to the sensitivity of talks, stated a subset of eight members that not too long ago selected a September manufacturing hike counted potential Russian provide disruptions among the many many lingering uncertainties within the oil market.
“At current, supply-side dangers are prone to outweigh demand-side pressures from tariffs. The U.S. seems to be entangling itself with a number of BRICS nations concurrently — a technique that will show counterproductive in delivering the market stability and readability sometimes anticipated from Washington,” Rystad’s Sahdev summed up.
