‘Oil’s’ well in September: How India kept crude flowing amid the energy crisis

India has kept the crude flowing even as the Middle East conflict has choked global energy supply chains for over seven months. Imports surged to a year-high of 5.26 million barrels a day (mbd) in September, powered by a surprise jump in Gulf supplies.The rise in shipments from the region helped bring more Middle Eastern crude back into India’s import basket, with Iraq emerging as the country’s second-largest supplier behind Russia for the first time since the US-Iran conflict began in February.The surge was broad-based across the Gulf, with Saudi Arabia, Iraq, the UAE, Kuwait, Oman and Qatar together accounting for 39% of India’s total crude imports in September, according to Kpler. This comes after supplies from some of these countries had dropped sharply following the start of the Iran war on February 28, making the renewed flow of Gulf crude a notable shift in India’s import basket.Iraq supplied 525,000 barrels per day to India in September, putting it behind only Russia. Saudi Arabia followed closely with 517,000 bpd, while the UAE supplied 438,000 bpd. Kuwait also saw a notable jump, sending 335,000 bpd to India, its highest volume in a year, according to ET.

(Figures in thousand barrels per day; info credit: ET)

How India kept its crude flowing

The return of Iraqi and Kuwaiti crude marks a significant shift in India’s import flows. Supplies from both countries had nearly disappeared from India’s import slate for months following the start of the Middle East conflict on February 28. Their return, alongside higher shipments from other Gulf producers, helped push India’s overall crude imports to their highest level in a year.The increase in Gulf shipments has been supported by a workaround being used by Gulf producers and traders to move crude through the Strait of Hormuz.Dozens of large crude carriers are crossing the waterway with their Automatic Identification System (AIS) transponders switched off. The cargo is then transferred through ship-to-ship (STS) operations in UAE and Omani waters.Other vessels subsequently carry the crude to customers, while the original carriers return to Gulf terminals for another run. National oil companies in the Gulf, along with some global traders, are arranging ships and taking the risk of crossing the Strait of Hormuz even as some attacks on vessels continue to be reported.The sharp increase in crude moving through the strait has also raised questions about whether Iran’s control over the waterway is weakening.

Why Middle Eastern crude matters to Indian refiners

The restoration of Gulf supplies has provided relief to Indian refiners, many of which are configured to process Middle Eastern crude.“Increased Middle East barrels availability not only helps restore some of the lost supply but also provides access to crude grades with relatively strong middle-distillate yields, which align well with India’s domestic product demand slate,” said Nikhil Dubey, lead analyst, refining at commodity analytics firm Kpler.The increase in Middle Eastern crude availability comes after the recent passage of the Graham Bill, which empowers the US president to impose tariffs of up to 100% on India and other buyers of Russian oil.For Indian refiners, the additional Gulf supplies therefore provide another source of crude if their exposure to Russian barrels needs to be reduced.“Ample Middle East barrels availability provides Indian refiners with additional sourcing optionality should they need to reduce their exposure to Russian barrels,” Dubey was cited by ET as saying.

More operations resume

The flow of crude has also been supported by the resumption of Saudi Arabia’s crucial East-West pipeline. The pipeline, which was attacked by the Houthis in September, has resumed operations and begun loading crude at the Red Sea port of Yanbu.With Gulf producers and traders continuing to organise shipments, crude from the Middle East has made up a larger share of India’s September import basket. The combination of increased Gulf availability, vessels crossing the Strait of Hormuz and ship-to-ship transfers in UAE and Omani waters has kept crude moving to Indian refiners amid the energy supply disruption.The flow of energy through the Strait of Hormuz has also picked up, despite the continuing Middle East crisis and security concerns. LNG cargoes exiting the waterway rose to 19 in September from 15 in June, according to S&P Global Energy, while Kpler counted 21 cargoes.More QatarEnergy-linked vessels have also reappeared west of the strait, with one now offloading its cargo at India’s Hazira port. However, the sustainability of these flows through winter remains uncertain, with vessels continuing to make “dark transits” by switching off their AIS transponders.