India’s Largest Refinery Shuns Russian Crude Carried on Sovcomflot Tankers

India’s largest refiner, Reliance, has stopped buying crude oil sourced from Russia and carried on tankers owned by Sovcomflot as the U.S. tightened sanction enforcement.

The information comes from two unnamed sources familiar with the situation who spoke to Reuters. Sovcomflot was among a number of Russian entities that were individually targeted with U.S. sanctions last month.

As a result, Reliance has asked its Russian oil trading partners to not load the shipments on Sovcomflot vessels, the Reuters sources said.

The latest round of U.S. sanctions caused worry among refiners in India, as the new restrictions make it more difficult to have oil shipped from Russia on non-sanctioned vessels, which would raise shipping costs and eat into refiners’ margins, Reuters reported at the end of February.

Even before the latest U.S. sanctions, Refining margins for India’s biggest state-owned refiners had dropped amid more difficult access to Russian crude and soaring freight rates due to the Red Sea disruption to shipments, analysts and traders said last month.

As a result of the U.S. sanction enforcement, Indian refiners are turning increasingly to U.S. crude, too, per a recent Bloomberg report. Since the start of March, Reliance and the two largest state-owned oil refiners, Bharat Petroleum and Indian Oil Corp. have bought some 7 million barrels of U.S. crude to load in April. This is the largest monthly volume of U.S. oil imports for India since last May, according to Kpler.

"Our preference is that refiners should not take oil in sanctioned vessels, because of our political and commercial interests and the U.S. sanctions," one unnamed source from the Indian government told Reuters.

Because of this shift, China is set to import even more Russian crude, including cargoes carried by Sovcomflot vessels. Kpler data cited by Bloomberg shows that imports of Russian crude into China this month would average 1.7 million barrels daily.

By Charles Kennedy for Oilprice.com

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