India Diversifies Oil Imports as Refiners Hedge Against Hormuz Risks

India is aggressively recalibrating its energy sourcing strategy, ramping up crude oil purchases from Russia and the UAE to mitigate supply chain uncertainties. As the global energy market awaits a full recovery of shipments through the Strait of Hormuz, Indian refiners are leveraging discounted Russian barrels and diversified Atlantic Basin supplies to ensure energy security.

Russia Solidifies Position as India's Top Oil Supplier

Data from maritime intelligence firm Kpler reveals a significant surge in India's reliance on Russian crude. In June (up to June 19), India imported an average of 2.66 million barrels per day (bpd) from Russia, a substantial jump from the 1.91 million bpd recorded in May.

This upward trend is driven by the competitive pricing of Russian barrels, which continue to offer attractive discounts to Indian refiners. Experts suggest that Russian crude will remain a cornerstone of India’s import basket even as Middle Eastern supplies stabilize, due to the favorable economics and long-term supply security it provides.

Strategic Hedging Amidst Strait of Hormuz Volatility

The recent disruption in the Strait of Hormuz—a critical artery carrying approximately 20% of global oil consumption—has forced India, the world's third-largest energy importer, to seek alternatives. While the reopening of the Strait following a US-Iran ceasefire offers hope, the durability of this peace remains uncertain.

To hedge against potential volatility, Indian refiners have maintained near-record imports from the UAE, which stood at 636,000 bpd in June. Furthermore, there has been a notable shift in the sourcing mix:

  • Venezuela: Emerged as a key player, with shipments reaching 209,000 bpd, though estimates for June suggest it could rise to between 300,000 and 400,000 bpd.
  • United States: Saw a sharp decline, with imports dropping to 91,000 bpd from 252,000 bpd in May.
  • Saudi Arabia: Remains a major provider with 384,000 bpd.

Sequential Recovery of Energy Commodities

According to Sumit Ritolia, Senior Manager-Modelling at Kpler, the normalization of energy flows through the Strait of Hormuz will likely be sequential rather than immediate. The recovery is expected to follow a specific hierarchy: LPG flows are predicted to normalize first, followed by Liquefied Natural Gas (LNG), and finally crude oil.

This is because Indian refiners have already adapted to months of disruption by establishing alternative sourcing routes for LPG. While the resumption of transit by Indian-flagged tankers—including those carrying over 860,000 tonnes of crude—is a positive sign, a full return to pre-crisis trade patterns may take months as insurers and shipping companies rebuild confidence in the waterway.

Key Takeaways

  • Russia's Dominance: Russian crude imports rose to 2.66 million bpd in June, cementing Moscow's status as India's primary energy partner due to significant price discounts.
  • Diversification Strategy: Indian refiners are increasingly looking toward Venezuela and the UAE to offset the geopolitical risks associated with the Strait of Hormuz.
  • Gradual Market Normalization: While the reopening of the Strait provides relief, the recovery of energy supplies will be gradual, with LPG expected to stabilize faster than crude and LNG.