India's Russian Oil Imports Remain Strong Despite Hormuz Tensions

Crude oil is climbing again, with the United States Oil Fund (AMEX:USO) up 2.77% to 134.54 dollars, sitting near the top of its 52 week range of 102.42 to 142.33 and carrying a relative strength reading of 61.27 that points to buyers still firmly in control. Behind the move sits a reshaping of global crude flows that started with the Strait of Hormuz disruption earlier this year and is still working itself out, most visibly in India, now the world's third largest oil importer and a bellwether for how tight the physical market really is.

Five Million Barrels a Day and a Russian Record

India pulled in roughly 5 million barrels a day of crude in June, the highest monthly total the country has ever recorded. What stands out is where it came from: 2.6 million barrels a day arrived from Russia, a record 54% share of India's total imports. That is a sharp turnaround from February, when sanctions pressure from Washington had pushed Russian volumes down to about 1.1 million barrels a day. Within four months, Russian supply to India more than doubled and became the backbone of the country's energy security planning rather than an opportunistic discount play.

The scale of that shift matters because India's strategic reserves offer little cushion. Even fully stocked, the country's SPR system covers only about 9 to 10 days of normal demand, far short of the 90 day benchmark the International Energy Agency uses based on historical net oil imports. The weaker import volumes India logged between March and May were not a deliberate move to dodge high prices, the way China is often described as doing. They reflected genuine scarcity after Gulf supply chains buckled.

Gulf Suppliers Vanish, Then Fight to Come Back

Gulf origin crude made up 52% of India's imports in February, before the Strait of Hormuz disruption scrambled the picture. Iraq, which had supplied around a fifth of India's crude that month, essentially disappeared from the mix for three months. The first cargo from Iraq's Basrah terminal, loaded back in February and stranded in the Gulf, did not reach India's west coast until late June. Kuwait, a 150,000 barrel a day supplier in February, vanished entirely. Saudi Arabia's shipments fell from around 1 million barrels a day to just 330,000 barrels a day by June, and that drop was less about logistics than pricing: Saudi term barrels became too expensive under the kingdom's own formula, even though pipeline delivered crude through the Red Sea port of Yanbu remained available. The UAE was the exception, holding steady at 500,000 to 550,000 barrels a day over the past three months and rising to become India's second largest supplier.

Who Is Actually Buying the Russian Barrels

Indian Oil Corporation led the buying spree, taking more than 900,000 barrels a day of Russian crude in June. Reliance Industries' Jamnagar refining complex followed with more than 500,000 barrels a day. Nayara Energy's Vadinar refinery, which had been offline for maintenance through April and much of May, came back online and ran exclusively on Russian crude in June at around 345,000 barrels a day. Nayara is nearly half owned by Rosneft and sits under direct EU and UK sanctions, so that particular flow is unlikely to shift no matter how the broader picture evolves.

Supply has also simply gotten easier to find. Ukrainian strikes on Russian refining infrastructure have, somewhat paradoxically, freed up more crude for export by cutting how much Russian refineries can process domestically. At the same time, Chinese demand has cooled as Beijing leans more on its own reserves while refining margins soften. Both trends have pushed additional Russian barrels toward Indian buyers.

Hormuz Traffic Recovers, and Discounts Follow

Since the US Iran ceasefire took hold on June 18, tanker traffic through the Strait of Hormuz has been rebuilding gradually. Loaded vessels have moved out while empty ones move in to load, letting Gulf producers ease output back toward normal and work down storage that had piled up during the closure. Rebuilding buyer confidence has meant real concessions: reported discounts of up to 5 dollars a barrel below the Dubai benchmark, along with ship to ship transfers near Fujairah that shift the risk of another closure onto sellers rather than buyers. Those workarounds are pushing freight rates higher, since tankers that got trapped inside the Gulf are now in heavy demand to move stranded cargoes out quickly.

Iraq is offering some of the steepest terms, reportedly discounting stranded cargoes by as much as 20 dollars a barrel below its official selling price just to clear tankers that have been sitting loaded for months. Other Gulf exporters may follow suit. What was a shortage of accessible barrels a few months ago is turning into something closer to a clearance sale, and that changes the math for Indian refiners weighing nearby Gulf crude against longer haul cargoes from Venezuela, Brazil or Colombia.

Where Does Iran Fit, and Can Russia's Edge Hold

Iranian crude remains largely off limits in practice, even with a 60 day window under a US waiver. Compliance teams are wary, Iranian banks stay under sanctions, and the ceasefire is fragile enough that buyers are more worried about legal and physical exposure than about the discount on offer. Russian crude, by comparison, is treated as an established and comparatively secure channel despite its own sanctions waiver expiring on June 17. Vessels carrying Russian oil are still sailing toward Indian ports.

Pricing has moved against Russian exporters, though. During the Hormuz closure, Russian barrels reportedly commanded premiums of 5 to 7 dollars a barrel over ICE Brent. They are now said to be selling to India at discounts of roughly 4 to 6 dollars a barrel as Gulf supply competes harder for market share. India's dependence on Russian crude probably eases somewhat as Gulf flows normalize, but it is unlikely to vanish. The Hormuz episode exposed just how thin India's reserve cushion really is, and that lesson is likely to keep Russian oil embedded in the country's supply strategy as a hedge against the next disruption, even as the discount that made it attractive narrows.

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