India's Russian oil imports surge on strong ESPO demand

• India’s Russian crude imports to reach 1.8M bpd in May.
• Refinery shutdowns boost demand for lighter ESPO crude.
• Strong Indian buying drives ESPO prices higher.

India's Russian crude oil imports are expected to increase almost to 1.8 million barrels per day in May, 10-month high, based on ship tracking information from Kpler. The increase is fueled by Indian refiners raising their buying of lighter grades of Russian crude, the ESPO Blend, in particular. The demand for such lighter grades will extend to July, with Indian refiners placing more than 10 cargoes of June-loading ESPO crude last week.

These were made before the European Union and Britain levied new sanctions against Moscow's "shadow fleet" of oil tankers and related financial institutions. India's robust demand has also led spot premiums for ESPO crude that is delivered to China, the biggest consumer of crude from Russia's Far Eastern port of Kozmino to go up.

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Shutdowns of India's big refineries, MRPL and Reliance Industries, have raised demand for crude feedstock at fluid catalytic crackers with good margins, according to Jay Shah, a senior analyst at Rystad Energy. Certain cargoes come under a long-term contract between Reliance and Rosneft, while deliveries at the western port of Sikka have risen since the beginning of the year.

ESPO crude supplied to India now trades at a premium of 50 cents to $1 per barrel over Dubai prices. There is more ESPO crude to supply to India as Chinese state-owned refineries shy away from sanctioned crudes and independent Chinese refineries are under tight quotas. This has raised ESPO prices for China, with July-loading cargoes trading at about $2 per barrel premiums—compared to $1.50 to $1.70 for June-loading cargoes.