Indian Refiners Return to Iraq as Russia Loses Grip on Top Supplier Spot

31st January 2024

Report: Indian Refiners Return to Iraq from Russia

After a whirlwind year of Russian domination, Indian refiners are turning back to Iraqi crude, pushing it back to the top of their import list in January 2024. This shift comes as US sanctions and Houthi rebel attacks in the Red Sea complicate Russian oil shipments, driving up costs and anxieties.

Iraq has emerged as the clear winner stated by Crude Analyst at Kpler, citing record-breaking Iraqi exports to India. Kpler estimates Iraqi cargoes reaching India at a staggering 1.30 million barrels per day (mb/d) this month, while Vortexa puts the figure at 1.11 mb/d, still the highest since April 2022.

The reasons for this switch are manifold. Western sanctions and tightening regulations on Russian oil have limited the pool of available vessels willing to transport it. This, coupled with the ongoing standoff between Western nations and Houthi rebels in the Red Sea, a crucial shipping route for Russian oil, has triggered panic buying and inflated insurance costs. Ships ferrying Russian crude are increasingly opting for the longer Cape of Good Hope route, adding 10-14 days and significant expense to their journeys.

Meanwhile, Iraqi Basrah crude has become a more attractive option. Prices fell to an average of $76.96 per barrel in December 2023, a welcome decline from the $82.82 and $87.58 recorded in November and October, respectively.

These competitive prices, combined with readily available tankers and a reliable supply chain, have made Iraqi oil the safer and more economical choice for Indian refiners.

This shift has significant implications for both India and the global oil market. India, the world’s third-largest oil consumer, relies heavily on imports to meet its energy needs. Diversifying its import sources away from Russia not only bolsters its energy security but also sends a message of increased geopolitical flexibility. For the wider oil market, the return of Iraqi crude could help ease supply concerns and bring some stability to volatile prices.

However, some analysts remain cautious. “While the current trend may suggest a permanent shift back to Iraq, it’s vital to remember that the geopolitical landscape is fluid,” said by Senior Energy Analyst at Vortexa. “If Russia manages to overcome its logistical hurdles and offer compelling discounts, the situation could rapidly reverse.”