Russian supply disruption poses fresh risk to India’s August crude imports; Red Sea remains the second key variable

India’s crude oil imports in August face a fresh risk from Russia, with uncertainty mounting over crude loadings from the Black Sea port of Novorossiysk following Ukrainian attacks on key export infrastructure. The volume of imports during the month will also depend on the safe passage of Saudi Arabian barrels through the Bab el-Mandeb (BeM) strait.

While refiners and traders do not expect an outright supply disruption, they warn that slower deliveries, higher freight costs and shrinking discounts on Russian crude could inflate India’s oil import bill, particularly at a time when the rupee remains weak against the US dollar.

Russia has emerged as India’s largest crude supplier over the past three years, accounting for as much as 50 per cent of the country’s imports as refiners increasingly relied on discounted Urals crude after Western sanctions. Any disruption to these supplies therefore carries outsized implications for Indian refiners, many of whom have reconfigured their sourcing around Russian barrels.

“As we speak, there are two developing scenarios important to track. First, crude oil (Urals grade) loadings from Novorossiysk port considering attacks by Ukraine on the Sheskharis terminal. Besides, traders are not offering discounts for September loadings. So, barrels will be there, but there will be a price,” said a trade source.

According to Kpler, the key uncertainty is whether Russia can sustain export volumes amid continued Ukrainian attacks on its upstream and downstream infrastructure. Russia’s crude exports in July have already declined by around 400,000 barrels per day month-on-month. Sheskharis, Russia’s largest crude export terminal, accounts for nearly 20 per cent of the country’s seaborne crude shipments.

The concern for India is less about physical availability than pricing. If Russian exporters trim discounts or shipments, Indian refiners will either have to pay more for Russian crude or replace some of those barrels with costlier cargoes from other suppliers, pushing up procurement costs and the country’s import bill.

The second variable is the continuing threat by Houthi rebels to Saudi Arabian crude exports transiting the Bab el-Mandeb strait.

“The threat has already impacted supply from there. Although the Saudis are using Egypt’s Sidi Kerir terminal on the Mediterranean coast, it also increases costs,” the same source said.

According to Equirus Securities, tankers can avoid the Bab el-Mandeb by taking alternative routes through the Suez Canal and the Mediterranean, but doing so could add nearly a month to voyage times. Longer journeys keep vessels tied up for extended periods, reduce tanker availability and significantly raise freight and insurance costs. Freight and insurance charges, which averaged $4-5 per barrel before the conflict, have now climbed to $13-15 per barrel.

An official with a domestic refiner said the expectation is that both Russian and Saudi barrels will continue to be available, but logistics are becoming increasingly “tricky”.

“Saudi Arabia usually supplies crude through VLCCs, but bypassing the traditional Red Sea route and exporting via Sidi Kerir adds to both voyage time and transportation costs,” the official said.

The geopolitical tensions have already begun influencing global oil prices. According to S&P Global Commodity Insights, mounting concerns over disruptions to Red Sea shipping helped push Brent crude futures above $100 per barrel on July 23.