India’s crude oil import system is facing a more difficult test than a simple question of whether enough barrels will be available. Russian supply remains central to the country’s oil basket, Saudi Arabia’s export logistics have come under pressure, and Chinese refiners could compete more aggressively for Russian cargoes as Iranian supplies remain constrained. Together, these pressures threaten to raise the landed cost of crude for a country that imports around 90% of its requirement.
The immediate issue is not necessarily a physical shortage. India has a diversified sourcing portfolio covering more than 40 countries, and analysts cited in the supplied report say additional supplies from Africa and South America could provide some relief. The more persistent risk is that disruptions across several routes could reduce discounts, increase freight and insurance costs, and make replacement barrels less economically attractive for Indian refiners.
That distinction matters because India’s exposure is determined not only by the volume of crude it buys, but also by the price and logistics of bringing every barrel to its refineries. According to Pankaj Srivastava, Senior Vice President, Commodity Market – Oil at Rystad Energy, every $1 per barrel increase in crude prices raises India’s import bill by approximately $5 million per day, assuming imports of around 5 million barrels per day. A sustained rise would therefore affect the external account even if refinery operations continue without a major interruption.
The first pressure point is Saudi Arabia’s East-West Pipeline. According to a Reuters report cited by Times of India, Saudi Arabia could run out of exportable oil stocks at key Red Sea ports within five to seven days if the pipeline remains shut following drone attacks. The disruption could potentially take up to 4 million barrels per day, or about 4% of global supply, off the market if it becomes prolonged.
The pipeline is important to India because the Red Sea port of Yanbu has supplied around 9% of the country’s crude imports since the war began, according to the report. Indian refiners may be able to manage an immediate shortfall using existing inventories, but a longer shutdown would leave them competing for replacement grades while also facing higher freight costs. This is an infrastructure problem as much as a commodity-market problem: when a major route is closed, the cost of accessing otherwise available crude rises.
The Saudi disruption is occurring alongside reduced flows through the Strait of Hormuz and attacks affecting other oil-export infrastructure. The supplied report says global oil supply is expected to fall by 5.7 million barrels per day this year, while global inventories are already depleted. It does not establish that all these disruptions will continue for a fixed period, but it shows how multiple stressed routes can narrow the practical choices available to importers.
Russian crude remains the most important buffer for India, but its reliability as a low-cost option is under pressure. Russia continues to account for the biggest component of India’s oil import basket, while attacks, shipping risks, refinery outages and port constraints are complicating the movement of its exports. Natalia Katona, a commodity analyst, told Times of India that Russian export infrastructure is already being used close to maximum capacity and that Black Sea shipments are being constrained by attacks, shipping risks and higher freight rates.
Katona estimated freight from the Black Sea region at around $20 per barrel and freight from the Baltic region at about $13 per barrel, attributing the elevated costs to the constraints affecting the trade. She said Russia may not be able to move all potentially exportable barrels if exporters cannot secure sufficient port and tanker capacity or are unwilling to accept the risks of sending cargo through the Black Sea.
This creates a complicated chain reaction. Refinery outages in Russia could theoretically release more crude for export. But if export infrastructure, tanker availability and port capacity are constrained, those barrels may not reach international buyers. If refiners cannot process crude and exporters cannot move it, production itself may eventually have to be reduced. The report says Russian Deputy Prime Minister Alexander Novak has acknowledged that output will decline somewhat year-on-year.
The second major pressure point is China. China is the largest importer of Russian crude, and any meaningful recovery in Chinese refinery demand could put Indian and Chinese buyers in direct competition for the same cargoes. Katona said China’s seaborne imports of Russian crude increased from 1.40 million barrels per day in July to 1.69 million barrels per day in August, in addition to approximately 1 million barrels per day arriving through pipelines.
The data cited in the report also indicates that China’s overall seaborne crude imports in August remained almost 40% below their pre-conflict level. That suggests the competition risk does not currently depend on a broad-based Chinese oil-demand boom. It may arise instead from the gradual return of Chinese refineries, stronger fuel margins across Asia and reduced access to Iranian crude.
Chinese buyers also have freight advantages for some Russian grades. Katona said China can receive ESPO, Sakhalin and Arctic crude more economically, particularly during the peak Northern Sea Route season. Some Urals cargoes from Russia’s western ports are also moving to China through the Northern Sea Route and the Suez Canal, bringing Chinese buyers into more direct competition with Indian refiners.
For India, the likely consequence is not necessarily the complete loss of Russian crude. It is the erosion of the discount that made Russian oil so valuable to Indian refiners. Katona said Urals delivered to India was offered at a premium of $1 to dated Brent for September-October arrivals, compared with discounts of more than $10 earlier in July. Even if Russian volumes into India remain close to 2 million barrels per day, the economic benefit could be considerably smaller.
This changes the policy and commercial problem facing Indian refiners. Russia may remain the cheapest option in absolute terms because competing medium-sour grades are more expensive, but the gap between Russian crude and alternatives can narrow sharply when freight, insurance, sanctions risks and shipping constraints rise. The relevant measure for refiners is therefore the delivered cost of a grade that matches the configuration of a particular refinery, rather than the headline price at the export terminal.
India’s diversified procurement basket gives refiners options, but each alternative has limitations. Praveen Rai, Director at Grant Thornton Bharat, said the most attractive substitutes from a cost and logistics perspective are likely to remain Iraq, Saudi Arabia and the UAE. Iraq is considered a close replacement for Russian Urals because its medium-sour grades are similar to the requirements of Indian refineries.
A second group of potential suppliers includes Venezuela, Brazil, Nigeria and Angola. However, longer sailing distances and geopolitical risks can increase freight costs. The United States can supply lighter crude grades, but those barrels may not offer the best refining economics for plants optimised for medium-sour crude and can involve higher freight costs. Rai said Indian refiners would likely adopt a portfolio approach, increasing purchases from Iraq and the UAE where possible while selectively sourcing from Venezuela, Brazil, West Africa and the United States.
The structure of India’s refining sector provides some immediate resilience. Strong product cracks and elevated refinery margins are offsetting much of the impact of higher crude costs, according to Srivastava. That means refiners may be able to absorb part of the increase in the short term. But margins can change, and a prolonged rise in crude, freight and insurance costs would make that cushion less reliable.
The wider implications extend beyond refinery balance sheets. Sumit Ritolia, Lead Analyst, Modelling and Refining at Kpler, said higher crude prices, freight, insurance and longer voyages would increase India’s delivered cost. In his assessment, the resulting pressure could affect the country’s current account and rupee, while sustained energy costs could add to inflationary risks.
There is also a governance question around the transmission of international oil costs into the domestic market. If domestic fuel prices are not allowed to fully reflect increases in crude and freight costs, oil marketing company margins and the government’s fiscal position could come under pressure. The supplied material does not establish how these costs will ultimately be distributed among consumers, refiners and the government, but it identifies the competing pressures clearly.
India’s immediate advantage is that its sourcing network is broad and Russian crude remains available. Its vulnerability is that diversification cannot eliminate cost risk when several major supply routes are simultaneously stressed. The evidence in the report points to a shift from a question of physical availability to one of price, grade compatibility, shipping capacity and geopolitical exposure.
The developments requiring close monitoring are the duration of the Saudi pipeline shutdown, the ability of Russian exporters to maintain seaborne flows, the pace of Chinese refinery demand, the availability of Iranian-linked supply and the movement of Russian crude discounts. For India, the central test will be whether its diversified import basket can preserve supply security without allowing higher landed costs to feed through into the import bill, currency pressures, refinery margins and domestic energy prices.
