Praying for China: will China accept all the Russian oil rejected by India

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave detailed comments to Forbes on how the observed reduction in Russian oil supplies to India will affect the prospects for oil exports and production in the country.

The situation with India looks quite pessimistic, Alexey Gromov believes. According to his estimates, India reduced its purchases of Russian oil to 0.9 million bpd in January. This is two times less than last year's maximum of 1.8 million bpd, reached in November. At the end of January, approximately 365,000 b/d of Russian oil were on tankers off the coast of Oman or India, waiting for either the Indian side or China to accept them, the analyst says.

"Most likely, the volume of 0.9 million bpd is the maximum supply we can expect in the coming months," he says. — Of these, 400,000 bpd is received by the Indian company Nayara Energy, where the key shareholder is the Russian Rosneft, so supplies there will continue. The volumes purchased by state-owned Indian refineries are unlikely to remain, in particular, due to duties that the United States may return."

Most likely, Russian oil supplies to India will reduce in twice in the coming months (to 0.45–0.50 million bpd), meaning that in fact, in addition to supplies for Nayara, very small volumes will be imported for other Indian refineries, Gromov believes.

In addition, Gromov notes, China has temporarily lost access to Venezuelan oil, which it previously received at large discounts as payment for loans provided to Caracas. According to the expert, between 600,000 and 700,000 bpd of Venezuelan oil were supplied to China by 2026. According to Gromov, China compensated for almost all of these volumes with Russian Urals grade oil.

China is potentially capable of taking major volumes of Russian oil, but this is a temporary phenomenon, Gromov says. As long as Venezuelan supplies are suspended, the risks of disruptions to Iranian oil remain, and the price discount that Russia is currently offering will be bought. But it is not worth counting on China to buy Russian oil at a record pace for many months to come.

According to Gromov, if Russia stays afloat by redirecting export flows from India to China, even under completely unfavorable economic conditions, the drop in production may be insignificant. If exports fail by the end of the year, it will drag down production figures, he says.