Challenges Ahead for Oil Supply in India Amid Sanctions on Russia
Experts within the oil sector have raised concerns regarding the capacity of Middle Eastern oil-producing nations, specifically Iraq and Saudi Arabia, to fulfill India’s growing demand for crude oil should U.S. sanctions on Russia significantly impact basic supply chains within the subcontinent.
Jormit Singh, Director General of the Indian Oil Federation, has indicated that India is implementing a strategy to offset potential deficits from Russian oil imports. This strategy may involve increasing supplies from Iraq, Saudi Arabia, and the United States in response to evolving geopolitical conditions.
An official from the Iraqi Oil Marketing Company, known as SOMO, has reported that regional allocations for 2025 have already been established, highlighting the rarity of shipments under the current circumstances. Consequently, it appears unlikely that Iraq, the second-largest producer within OPEC, will be in a position to adequately meet supply demands from India.
Similarly, Saudi Arabian crude supply is also facing constraints. Following the scheduled shipments for March, India may have to wait until April for additional supplies from Saudi Arabia. Although OPEC has maintained existing production cuts, there are expectations that these will be reduced, potentially increasing the amount of crude available in the market.
Forecasts suggest that production increases from Saudi Arabia and Iraq will be modest, with expected rises of 56,000 barrels per day and 12,000 barrels per day, respectively, in April. Adjustments to discount policies will likely depend on prevailing market conditions.
Both Iraq and Saudi Arabia are bound by their commitments under the OPEC+ agreement, with Iraq historically struggling to meet its production quotas. In January, Iraq’s output was 4.06 million barrels per day, lower than the previous month but still exceeding its allocation by 60,000 barrels daily. Meanwhile, Saudi Arabia produced slightly below its target of 8.978 million barrels per day, achieving an output of 8.97 million barrels per day.
In January, the United States and the United Kingdom enacted new sanctions on the Russian energy sector, targeting two of Russia’s largest oil firms, Gazprom and Surgutneftegas. While some analysts assert that the tangible impact of these sanctions will be minimal, the actual ramifications will continue to unfold.
As of late January, Russia’s Urals crude deliveries to India were recorded at 1.2 million barrels per day, according to Chinese statistics. By February 12, data indicated that shipments to India had reached 490,000 barrels per day for that month.
The complexities surrounding these dynamics highlight the challenges facing India in securing sufficient oil supplies while navigating the geopolitical landscape and sanctions affecting major global producers.
