Oil refiners don't see supply risk even as Trump targets Russian crude

Mint

21 hours ago

New Delhi: India's oil refiners do not see any risk to well-diversified crude supplies after US President Donald Trump imposed a penalty on the country for buying Russian crude, in addition to a 25% tariff, according to two people in the know.
An immediate diversion of Russian crude is not expected, given that shrinking discounts have brought down purchases, the people said on the condition of anonymity. The Union petroleum ministry is confident that supplies would not be an issue for India as its import basket is diversified with 40 countries exporting oil to the country, they said.
'Currently, the government and the oil refiners are in a wait-and-watch mode. There is a hope that the bilateral trade talks would conclude on a favourable note and the high tariff may come down," said an official with a state-run refiner. 'As of now, there is no decision to stop Russian oil imports and no such directive has been given by the government."
The US president on Wednesday imposed 25% tariffs on Indian exports to the world's largest economy, starting 1 August. The decision came even as the two countries are negotiating a bilateral trade deal. In addition, Trump has announced an unspecified penalty on India for buying Russian crude and defence equipment. Moscow is under Western sanctions for its invasion of Ukraine.
Russia remained India's top crude supplier during the first half of 2025, with shipments averaging 1.67 million barrels per day (bpd), marginally higher from 1.66 million bpd a year earlier.
If the need arises to divert from Russian oil, there are adequate oil supplies from other countries, as Indian refineries have diversified their import basket to about 40 countries, the second person quoted earlier said.
Queries emailed to the Union ministry of petroleum and natural gas, Indian Oil Corp., Bharat Petroleum Corp., Hindustan Petroleum Corp., Reliance Industries Ltd and Nayara Industries remained unanswered till press time.
'Countries in West Asia and South America would be willing and even competing to supply oil to India. For Indian refineries, shifting to varying crudes is not much a technical issue now," said Deepak Mahurkar, leader, oil and gas, PwC India. 'So, if required, increasing imports from other sources should not be a concern."
West Asian countries including Iraq, Saudi Arabia, Kuwait and the United Arab Emirates (UAE) together supply about 45-50% of India's total oil imports. Iraq and Saudi Arabia are the second and third largest suppliers after Russia. The Organization of the Petroleum Exporting Countries (Opec) countries have also been increasing their supplies.
Crude may turn costlier
Although supplies are not likely to be affected, prices may go up in the global market and for the crude variety that will replace Russian supply in case the hefty tariffs are imposed for long.
Russian oil comprises 7% of the global oil consumption, and keeping it away from the market may have a massive impact on prices, according to sector experts.
Supplies would not be a cause of concern for India given its diversified sources, but the potential impact of cutting off Russian oil from the international market would be a significant increase in international oil prices, said Prashant Vasisht, senior vice president and co-group head, corporate ratings, at Icra Ltd.
He noted that a $10 per barrel increase in crude oil prices would increase India's oil import bill by about $13-14 billion. India imported crude worth $137 billion in FY25. Imports are expected to rise as the International Energy Agency has projected India to be the primary driver of global oil demand growth through 2030.
Noting that it is too early to comment on the economic impact of the tariff announcement, Madan Sabnavis, chief economist with Bank of Baroda, said the import bill may not hit significantly as oil prices globally are considerably low and countries like Iraq are offering oil to India at low prices.
'India may not want to stop purchases from Russia. It may increase imports from other countries and global prices are also low currently. A lot also depends on how the trade deals of the US with other countries turn out," said Sabnavis. 'There may be spikes in oil prices as announcements are made going ahead on tariffs and trade deals, but a major jump in prices for the long term is not expected as of now."
India has already increased its imports from the US after the two countries pledged to take bilateral energy trade to $20 billion. According to S&P Global Commodity Insights, India imported nearly 271,000 bpd of crude oil from the US in the January-June 2025 period, a 51% increase over a year earlier.
Meanwhile, according to Pronob Sen, former chief statistician of India, Trump's 25% tariffs may well be a bargaining tactic to achieve a favourable trade deal for the US, and the tariffs may come down when the agreement is finalized.