India’s reliance on Russian oil may be ‘approaching a limit’

India’s ability to import more Russian oil may have hit a limit, analysts tell CNBC, citing infrastructural and political constraints, as well as limitations to Russian oil flows.

“India will look to continue Russian crude imports, but perhaps it has reached its limit, hampering any additional barrels,” according to Janiv Shah, senior analyst at Rystad Energy.

Since the Kremlin’s invasion of Ukraine in February last year, India’s refiners have been snapping up discounted Russian oil.

Moscow has since leapfrogged to become India’s leading source of crude oil, accounting for about 40% of India’s crude imports.

However, the volume of crude oil consumed and processed by India’s refineries has now hit a “seasonal peak” and would only trend downwards from here, Shah told CNBC in an email. 

His sentiments were echoed by commodity intelligence firm Kpler, which highlighted that in addition to refineries being currently shut, demand for oil is set to trickle down too.

“For the first time this year, some of Indian refiners will be undergoing maintenance which was just not the case in January to May 2023 when there were no turnarounds at all. Everyone was firing on all cylinders,” said Kpler’s lead crude analyst, Viktor Katona.

India’s monsoon season started in early June, and the summer period is often associated with lower demand for oil products as a result of lower mobility and construction, Katona added.

Fuel demand in India, the world’s third largest oil consumer, usually enters a lull during the four-month monsoon season. India’s total oil demand in June slipped 3.7% month-on-month to 19.31 million tonnes, according to data from India’s Petroleum Planning and Analysis Cell.

However, June still marked the 10th consecutive month-on-month increase in India’s imports of Russian crude, Kpler’s data showed.

“An unprecedented feat in recent history, especially given the volumes in question — 2.2 million barrels per day in June,” Katona said.

And that’s the highest volume that India’s imports of Russian oil can go — at least for the rest of the year, according to his predictions.

“I would say 2.2 million b/d will be the peak this year … We believe India’s imports of Russian crude will see a slight downward correction to two million barrels per day. That will be the sustainable level of buying,” he said.

And it seems the limit goes both ways.

Flows coming out of Russia have a “finite limit,” said Daniel Hynes, senior commodity strategist at ANZ.

“Any additional supply coming out of Russia … that flows into Asia, I suspect it’s done. It’s maximum amount now,” he added. 

Russian oil exports fell 600,000 barrels per day to 7.3 million barrels per day in June — the…