Reliance drives India’s Venezuelan oil imports to seven-year high as Russian crude gets costlier

India is poised to sharply increase its imports of Venezuelan crude this month, with steep discounts making the South American oil more attractive to refiners such as Reliance Industries Ltd as Russian supplies become more expensive.

Venezuelan crude deliveries to India are expected to more than double to about 465,000 barrels a day in October, from 196,000 barrels a day in September, according to Kpler estimates. If all scheduled cargoes arrive on time, the October figure would be the highest since December 2019.

The increase comes as Indian refiners look to diversify their crude purchases amid tighter Russian supplies, rising prices and the threat of fresh punitive tariffs linked to purchases of Russian oil.

Reliance set to take bulk of Venezuelan supplies

All Venezuelan cargoes currently bound for India list Sikka as their destination, the port used by Reliance for its Jamnagar refinery complex in Gujarat, the world's biggest refinery complex.

Actual October flows could differ from the scheduled volumes, however. At least two tankers are due to arrive on India's west coast on October 31, according to ship-tracking data from Kpler.

A Reliance spokesperson did not immediately respond to a request for comment.

Venezuelan crude has become an increasingly important component of India's diversification strategy since the beginning of the year, according to Sumit Ritolia, senior manager of modelling at Kpler.

Ritolia expects actual October deliveries to be closer to 350,000 barrels a day because some vessels may not discharge before the end of the month.

Russian oil loses its price advantage

India resumed buying Venezuelan crude in February after an almost year-long pause. The resumption followed the lifting of US sanctions after the ouster of former Venezuelan leader Nicolás Maduro, which allowed Venezuelan oil flows to increase.

At the same time, Russian crude, which has been India's biggest source of oil, has become less attractive as prices have risen. Russia's flagship Urals grade loaded in the Baltic has reached a wartime high.

Moscow's share of India's crude imports fell to about 35% in September from as high as 56% in July, according to Kpler data. Recent reporting has also indicated that Indian refiners expect Russian supplies to remain tighter in October and November, partly because of reduced Russian exports and stronger competition from Chinese buyers.

Indian refiners have also been cutting back on Russian purchases after a sweeping US sanctions law increased the risk of fresh punitive tariffs. The shift has added to pressure on refiners to find alternative sources of crude.

Merey discount draws Indian buyers

Venezuela's flagship Merey crude is currently being sold at a discount, while Russian Urals is trading at a premium before shipping costs.

The price gap helps compensate for the longer voyage from Venezuela and the challenges involved in processing Merey, a dense, high-sulphur crude.

Reliance's Jamnagar complex is equipped to process such heavy barrels, making the refinery particularly suited to Venezuelan supplies. Kpler had earlier reported that Reliance was among the Indian refiners increasing Venezuelan purchases after US restrictions on the country's oil trade were eased.

However, Venezuelan crude is not an easy substitute for Russian oil across India's refining system. Only a limited number of Indian refineries can process large volumes of heavy, high-sulphur grades such as Merey on a sustained basis.

“These barrels are relatively difficult, heavy barrels, and not every Indian refinery can process them continuously or in large proportions,” Ritolia said.

Higher freight costs could limit the shift

The surge in Venezuelan purchases may also prove difficult to sustain if tanker rates continue to rise.

Venezuela's overall oil exports fell by nearly 9% in September to about 1.08 million barrels a day, according to Reuters data, with high freight costs prompting traders to seek larger discounts and contributing to tanker rerouting and delays. Shipments to India fell to about 253,000 barrels a day that month.

For India, the developing shift underlines how refiners are adjusting their crude basket as the economics of Russian oil change. Venezuelan supplies offer an alternative, but their availability, freight costs and processing requirements will determine how far they can replace Russian barrels.