Whalesbook
Ukraine Attacks and Waiver Expiry Threaten India's Oil Supply
Ukraine's growing drone attacks on Russia's key oil export terminals, including Primorsk, Ust-Luga, and Novorossiysk, pose an immediate threat to India's crude oil supply. These ports are vital for a large part of India's energy needs and have been repeatedly targeted, raising concerns about disruptions to refining. Adding to this physical threat is the recent expiration on April 11 of a U.S. waiver that had allowed continued purchases of Russian oil. India and other Asian buyers are seeking an extension, but the outcome is uncertain amid heightened geopolitical tensions. The International Energy Agency (IEA) has noted these events as significant risks for Indian refiners in the coming weeks. In the past year, these three Russian ports handled about 80% of Russia's crude oil exports sent to India, showing how concentrated this supply route is. Loadings at Novorossiysk and Ust-Luga have reportedly remained limited, even as some affected ports have resumed operations. Before the recent strikes, these terminals together handled nearly 60% of Russia's total seaborne crude exports. These combined threats – physical attacks, geopolitical uncertainty, and policy shifts – highlight a critical weakness in India's energy strategy. Crude oil prices have reflected this instability, with Brent trading around $98 per barrel and WTI near $97 on April 14, 2026.
India's Growing Reliance on Russian Crude
Russian oil has become a key part of India's energy strategy, with dependence growing significantly. Following Western sanctions on Moscow, India greatly increased its purchases of discounted Russian crude, making it a main source for its refineries. This reliance has been made worse by unstable prices in West Asia, which have tightened global supplies and driven up costs, making alternative sources, including from Iran, harder to get due to geopolitical risks and supply chain issues. In March 2026, India's imports of Russian crude averaged 1.98 million barrels per day, the highest since June 2023. This surge is seen in refinery operations, with the IEA reporting that 12 Indian refineries processed Russian crude in March, up from seven in February. This shift towards Russian oil, while offering cost advantages, creates concentrated risk. Indian refineries have the technical ability to process medium-sour crude, a type that Russian grades often are, making them a suitable, though now more risky, choice.
Refining Sector Risks and Margin Pressures
The possibility of ongoing disruptions to Russian crude flows directly impacts India's refining sector. While global refining margins have averaged a healthy $8-$12 per barrel in early 2026, India's domestic refiners face difficult rules. Recent government actions, such as a higher windfall tax on diesel exports and capped refining margins at $15 per barrel, aim to ensure fuel is available locally while managing costs for state companies. This regulatory environment could reduce profits for refiners, especially those counting on export margins. For example, Reliance Industries, a major player, saw its shares fall significantly on March 27, 2026, after similar past tax impositions. Major Indian oil and gas companies like ONGC (Market Cap ₹3.60T, P/E 9.49) and Indian Oil Corporation (Market Cap ~$21.9B) are managing this situation. The shift towards Russian crude, while offering price advantages, now exposes these companies to supply shocks from conflict zones and the changing policy landscape around sanctions and waivers. The current geopolitical climate, including reports of a U.S. naval blockade on Iranian ports and the Strait of Hormuz initiated on April 13, 2026, adds more uncertainty to global shipping routes and price volatility.
Strategic Risks of India's Russian Oil Dependence
India's heavy reliance on a single, increasingly vulnerable source of discounted crude oil represents a major strategic mistake, exposing the nation's energy security to many risks. While India has worked to diversify its suppliers to about 40 countries and increase its use of non-Hormuz shipping routes (now ~70% of imports), this diversification might not be enough if supplies are hit directly. Unlike countries like Japan (90-95% Gulf dependence) or South Korea (over 70% Gulf dependence), India's challenge is not just geographical chokepoints but its specific reliance on Russian volumes, which are now directly targeted. Buying Russian crude, while smart for saving money when global prices are high, has built in a weak point. This strategy is further complicated by the upcoming expiry of the U.S. waiver, which could bring back sanctions risks and insurance issues, similar to past problems with Iran and Russia. The current infrastructure issues at key Russian ports, with loadings at Ust-Luga and Novorossiysk remaining limited, mean that even a partial return to normal operations might not restore the previously relied-upon volumes. This difficult situation leaves Indian refiners open to price jumps and direct supply shortages. Furthermore, India's strategic oil reserves can cover general supply problems but might not be enough for specific disruptions to a vital input like Russian crude. India's budget is also at risk, as oil imports are a large part of its spending, and price shocks can worsen inflation and trade deficits.
Outlook and Analyst Projections
Analysts expect oil prices to remain volatile, with Brent crude possibly trading above $90 per barrel through 2026, potentially ending the year around $88, according to ANZ. Morgan Stanley forecasts Brent at $110 per barrel in the second quarter of 2026. The global demand for crude oil is predicted to see its biggest quarterly drop since the Covid-19 pandemic in Q2 2026, driven by continued high prices and possible shortages. In this environment, India's energy sector faces close watch. While some Indian energy stocks have shown strength, investors are cautious, influenced by geopolitical uncertainties and government actions like windfall taxes and margin caps. The outcome of the U.S. waiver extension talks will be a key factor for short-term import plans, though traders expect India to keep buying a lot of Russian crude as long as oil from the Persian Gulf is restricted.