India says refiners well-covered amid Russian sanctions, enough time to plan future oil imports

India's near-term oil supplies are unlikely to be affected despite sweeping sanctions on Russian oil, thanks to a two-month winding down period allowing refiners enough time to work out a future sourcing roadmap, senior government officials said.

While India is still studying the impact of the sanctions, officials added the plentiful availability of oil across the globe as well as OPEC's spare capacity should be able to keep the supply situation comfortable and prices under check.

"The impact of sanctions could be felt after two months at the expiry of the wind-down period. There is no supply shortage. OPEC has enough spare capacity. And non-OPEC suppliers like the US, Canada, Brazil and Guyana can easily open the taps," a senior petroleum ministry official said.

The US and the UK announced a fresh package of sanctions on Russia's energy sector Jan. 10, including curbs on two major Russian oil producers, doubling down on a recent push to hit Moscow's oil revenues being sustained by a shadow tanker fleet. The announcement set March 12 as the deadline to wind down financial transactions

The sanctions tightened curbs against Gazprom Neft and Surgutneftegas and added more than 180 ships, dozens of oil traders, oilfield service providers, tanker owners and managers, insurance companies, and energy officials to a blacklist, the US Treasury said in a statement.

Eyes on prices

"The spike in prices is a knee-jerk reaction. We expect the market to ease and we don't expect to see oil above $80/b for long," the petroleum ministry official added. "India refiners are heading for negotiation for a term deal with Middle East suppliers. Depending on the market they may increase term volumes."

Crude oil futures ended the Jan. 13 session at the highest level since August as global supply balances tightened in the wake of the latest US clampdown on "shadow fleet" tankers carrying sanctioned Russian and Iranian oil exports.

NYMEX February WTI settled $2.25 higher at $78.82/b and ICE March Brent climbed $1.25 to end the session at $81.01/b.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $82.975/b on Jan. 13. up over 3% on Jan. 10 and the highest since Aug. 15 as the market reacted to the tighter sanctions.

In 2024, Russian crude imports to India averaged 1.7 million b/d, making the OPEC+ producer its largest supplier, data from S&P Global Commodities at Sea showed.

Around 95% of newly sanctioned ships loaded crude oil and refined products that originated from Russia, while some of the remaining sanctioned ships loaded oil originating from Iraq and Iran. The total transported volumes are 1.8 million b/d of crude oil and refined products in 2024. Of that, 1.5 million b/d of Russia-origin crude shipped on the newly sanctioned ships to China and India, with about 900,000 b/d going to China and about 450,000 b/d to India, according to CAS data.

"The market is waiting for Russia to respond to sanctions. The market is still digesting what this latest sanction is all about. I don't expect any oil shortage in the market," the official said.

Another oil ministry official said that Indian refiners were well-covered for supplies for the next two months. "There would be challenges beyond the two months as it appears. We do hope things will be clear to the market within the next two months."

Key global implications

Bernstein said in a research note Jan. 13 that the latest OFAC sanctions would add more teeth to previous sanctions which were largely ineffective against Russian oil flows. "Going forward under these new sanctions, it will be more difficult for Russian crude to be supplied to Asia, which will increase the requirement for Middle Eastern crude to Asia."

It added that the market would be keeping an eye on three key developments.

"Firstly, Russian companies have been adept at finding ways to avoid US controls, although these are stricter. Secondly, OPEC could unwind cuts more aggressively given its large spare capacity. And thirdly, a new Trump administration could choose to deal with Russia in an entirely different way, particularly with ending the Russia-Ukraine war," Bernstein said.

It added that the US had been reluctant to be more aggressive on Russian oil sanctions given the potential impact on gasoline prices and the global economy.

"The decision to impose these sanctions at the end of the current US administration is certainly interesting. But the key question is what happens next. If President Trump seeks to end the Russia-Ukraine war, this will presumably result in a lifting of Russian sanctions as part of any agreement which could be bearish for oil," Bernstein added.