India Establishes Record June Oil Imports as Russia Emerges as Primary Supplier

India has set multiple new records in oil imports for June, with total import volumes reaching approximately 5 million barrels per day (b/d), the highest ever recorded for a single month. Of this volume, 2.6 million b/d came from Russia, accounting for 54% of India's total crude oil imports and marking a record in Russia-India trade relations.

Russian supply, which had fallen to around 1.1 million b/d in February under financial pressure from Washington, has doubled in four months and become a cornerstone of India's energy security strategy.

Compensating for Middle Eastern Shortfalls

India's total import figures indicate that refiners have partially compensated for the collapse in Middle Eastern supply due to disruptions in the Strait of Hormuz. This is critically important as the country's strategic petroleum reserve (SPR) remains extremely limited. Even when fully stocked, this system can only meet about 9-10 days of domestic crude oil demand, compared to the 90-day standard based on average net oil import volumes previously recommended by the International Energy Agency (IEA).

Therefore, India's weaker import volumes in March-May were due to supply shortages rather than attempts to avoid high prices as China appears to have done.

Shifts in Middle Eastern Supply

Since the closure of the Strait of Hormuz, New Delhi has sought alternatives to Middle Eastern-origin crude, which constituted 52% of India's imports in February. Iraq supplied about one-fifth of India's crude oil in February but then virtually disappeared from the import mix for three months. Only in late June did the first shipments from Iraq's Basrah terminal (loaded in February and stuck in the Middle East since then) reach India's western coast.

Kuwait completely disappeared after the Hormuz closure, after supplying about 150,000 b/d in February, while Saudi Arabia dropped from India's second-largest supplier (around 1 million b/d in February) to just 330,000 b/d in June. Though Saudi Arabia's decline wasn't primarily a logistics issue—the kingdom could still export crude oil via pipeline from the Yanbu port on the Red Sea. The bigger barrier was pricing; under the current formula, Saudi crude oil under long-term contracts became one of the most expensive types available.

The UAE was the only Middle Eastern exporter to recover quickly from the March shock, shipping an average of 500,000-550,000 b/d to India over the past three months and becoming the country's second-largest supplier.

The Actual Demand for Russian Oil

In this context, India's return to Russian crude and the increase in purchases to record levels was more a necessity than a preference. Russia has filled much of the gap created by the Middle Eastern crisis, supplying a record 2.6 million b/d in June.

Indian Oil Corporation (IOC) was the largest purchaser, buying over 900,000 b/d. Reliance Industries' Jamnagar Complex was India's second-largest Russian oil buyer, purchasing over 500,000 b/d. Nayara Energy's Vadinar refinery, which underwent maintenance in April and most of May, returned to full operation and imported only Russian crude in June, around 345,000 b/d. Nayara has approximately 50% ownership by Rosneft and is under direct sanctions by the EU and UK, making this oil flow predictable and irreplaceable in any scenario.

Russian crude has also been available in larger quantities. Ukrainian attacks on Russia's refining infrastructure have inadvertently helped. Lower refining output has freed up additional crude for export, while Chinese crude demand has slowed as Beijing prioritized using its SPRs, with domestic consumption weakened by reduced refining margins. That combination has left more Russian barrels available for India.

The Future of India's Crude Oil Import Mix

The key question is what India's crude oil import mix will look like in the coming months. Middle Eastern barrels are now being positioned for a significant return. Since the US-Iran ceasefire agreement took effect on June 18, traffic through the Strait of Hormuz has recovered slowly but steadily. Tankers have been leaving the Middle East while empty vessels have been moving in to load, allowing producers to gradually normalize production and alleviate the glut of storage capacity.

Middle Eastern exporters need to restore confidence in their product. Beyond reported discounts of up to $5/barrel versus the Dubai benchmark, some producers are trying to reduce risk for shipments through ship-to-ship transfers near Fujairah. Under such agreements, the risk of another Hormuz closure remains with the seller rather than the buyer.

That strategy is adding further pressure on freight rates that have been inflated by vessels stuck inside the Middle East. Demand for available tankers is even stronger now as producers try to move the backlog of barrels through Hormuz quickly. For India, this changes the economics of sourcing. Middle Eastern barrels are geographically closest and increasingly discounted, while long-haul shipments from Venezuela, Brazil, and Colombia become more expensive.

Price will therefore be the determining factor. There has been discussion within India's state-owned refining circles about the need to diversify away from the country's pre-crisis dependence on Middle Eastern oil. However, this looks more like a strategy to push producers to offer more reasonable discounts rather than a decisive move away from the country's closest oil source.

Iraq, which had supplied about 1 million b/d to India before the crisis, is reportedly offering the stranded barrels with discounts of up to $20/barrel versus its official selling price (OSP) just to pay for the already-loaded vessels. Other Middle Eastern producers may have to follow this pattern. The regional market is shifting from a shortage of accessible barrels to a clearance sale of inventory.

Iranian crude remains a riskier option. Compliance departments are thoroughly inspecting cargoes, and few buyers want to be the first to act. The US 60-day waiver from sanctions is short, Iranian banks remain sanctioned, and the fragile ceasefire has made companies more concerned about the legal, financial, and physical security of transactions than potential discounts.

In contrast, Russian crude is viewed as a relatively safe and established supply line. Although the sanctions waiver expired on June 17, many tankers carrying Russian crude are still heading to Indian ports. But Russian exporters will have to adapt to a new pricing environment as discounted Middle Eastern barrels return. During the Hormuz closure, Russian barrels were reportedly trading at premiums of $5-7/barrel versus ICE Brent. They are now estimated to be selling to India at discounts of around $4-6/barrel.

Conclusion

Trade with Russia is likely to remain elevated at least until the Middle Eastern supply chain fully normalizes. India cannot afford a repeat of the March disruption when the loss of Middle Eastern crude exposed the limitations of the SPR and the vulnerability of its import system. Even if discounted Middle Eastern barrels return strongly, Russian oil is unlikely to disappear from India's supply mix. Its role may become less dominant, and its price will have to adjust, but the lesson from the Hormuz crisis is clear for New Delhi: access to Russian crude has become insurance against future disruptions.

Written by Natalia Katona for Oilprice.com

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