Nigerian Oil Stands to Gain as India Shies Away From Russian Crude

Yahoo

18 hours ago

A week ago, U.S. President Donald Trump came down hard on India, doubling its tariff rate from 25% to 50% for fueling Putin's war in Ukraine by continuing to buy massive quantities of Russian oil. We reported that India's imports of Russian commodities have skyrocketed since the war began, surging to $65.7 billion in 2024 from $8.25 billion in 2021, according to India's The Business Standard. In sharp contrast, imports by the European Union and the U.S. have declined by more than 80% as they look to choke Russia's war machine. And now India has rapidly moved to distance itself from Moscow, turning to Africa and other suppliers as it goes into a buying frenzy.
In recent weeks, Indian refiners have purchased two million barrels of Nigerian crude for September and October delivery; one million barrels of Angola's Girassol, three million barrels of Abu Dhabi Murban, and a million barrels of U.S. Mars. Interestingly, India is returning to the spot market, with Punch reporting that state refiner Bharat Petroleum Corporation Limited (BPCL) has made spot purchases and also negotiated for September deliveries. Over the past couple of years, India has become the biggest buyer of discounted Russian crude, accounting for 40% of its total imports at its peak in 2024. This was enough to meet India's surging oil demand and keep it off the spot markets.This might be the beginning of a long-term relationship between India and Nigeria, thanks to the low sulfur content of Nigerian crude grades, making them ideal for India's refineries. However, India will now have to contend with Africa's largest refinery–the Dangote Refinery. According to Devakumar Edwin, vice president Dangote Industries, the giant refinery will buy 100% of its crude from the Nigerian market by the end of the current year, a reversal from its earlier trend of buying most of its crude from the United States, Brazil, Equatorial Guinea, Angola and Ghana. Owned by Nigeria's and Africa's richest man, Aliko Dangote, the 650,000-barrel-per-day refinery began operations in 2024 after repeated delays. Ranked as having a higher capacity than Europe's largest refineries, the $20-billion refinery now produces diesel, gasoline, aviation fuel and naphtha. Though yet to ramp up operations to full capacity, the Dangote refinery has been a major milestone for Nigeria and Africa's energy sector, transforming Africa's largest oil producer into a net exporter of petroleum products. However, the refinery was initially forced to rely on large volumes of imported crude, with local traders unable to meet its demand. Thankfully, improving coordination between the refinery, the Nigerian government and local oil traders has made the supply of domestic crude more consistent and reliable. Last month, Dangote refinery purchased 53% of its crude from Nigerian producers, with 47% coming from the United States. According to Edwin, the plant is currently processing ~550,000 barrels of crude per day, good for 84.6% of its maximum capacity.
India is also looking to break China's dominance in rare earths supply, recently establishing cooperation agreements with mineral-rich countries in Latin America, Asi,a and Africa shortly after China further restricted the export of REE in 2024.
"In the interest of developing bilateral cooperation with countries having rich mineral resources, the Ministry of Mines has entered into bilateral agreements with the governments of several countries, including Australia, Argentina, Zambia, Peru, Zimbabwe, Mozambique, Malawi, and Côte D'Ivoire, as well as international organizations such as the International Energy Agency (IEA)," India's Minister of State for Atomic Energy, Jitendra Singh, said in a written statement.
Still, India has adopted a recalcitrant tone, vowing to continue buying Russia's crude, two sources previously told Reuters."These are long-term oil contracts. It is not so simple to just stop buying overnight,'' one of the sources said. A second source tried to justify India's imports of Russian crude, claiming it had helped to avert a surge in global oil prices. The source also pointed out that, unlike the situation in other heavily sanctioned countries like Iran and Venezuela, Russian crude is currently not subject to direct sanctions, and India was only buying from the embattled country because it offered cheaper oil thus shaving billions of dollars off its energy bill every year.
Well, this might actually be India's official position: According to India's foreign ministry, India has maintained a "steady and time-tested partnership" with Russia. "On our energy sourcing requirements ... we look at what is available in the markets, what is there on offer, and also what is the prevailing global situation or circumstances," he said.
By Alex Kimani for Oilprice.com
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