India's Refinery Runs Fall to 7-Month Low Amid Sanctions Uncertainty and Shifting Oil Sourcing

Provisional government data indicates that Indian refiners processed 5.14 million barrels per day of crude oil in September, a 5.7% decrease from August and the lowest throughput recorded since February 2024. This decline in processing coincides with a drop in India's total fuel consumption, which fell by 0.5% month-on-month to 18.63 million metric tons in September, hitting a one-year low.

Despite lower refinery runs, India's crude oil imports saw a slight increase of 1.7% in September, reaching 19.93 million metric tons, the highest since June.

The global oil market is navigating the impact of fresh United States sanctions imposed on Russia's key oil producers, Lukoil and Rosneft, due to the ongoing conflict in Ukraine. These sanctions require companies to wind down transactions with these entities by November 21.

In response, many Indian refiners have temporarily halted new orders for Russian crude, awaiting clarity from the government and suppliers, and are exploring alternative sources, including the spot market. However, state-run Indian Oil Corporation Limited has declared it will continue buying Russian oil as long as it complies with existing sanctions. In parallel, Bharat Petroleum Corporation Limited has signed agreements to develop a significant greenfield refinery and petrochemical complex in Andhra Pradesh, valued at approximately 1 trillion rupees ($11.38 billion).

Impact: This situation could lead to increased price volatility for crude oil and refined products. Indian refiners face challenges in securing consistent crude supplies, potentially impacting operational efficiency and profit margins. Companies reliant on imported crude may experience higher costs if they shift to more expensive alternative sources. The ongoing investment in new refinery capacity by companies like Bharat Petroleum suggests a long-term commitment to domestic refining, but near-term operational impacts from sourcing disruptions are possible. The differing stances on Russian oil purchases between major state-run players highlight the complex geopolitical and economic factors influencing India's energy security. Impact Rating: 7/10

Difficult Terms: Crude throughput: The amount of crude oil processed by a refinery over a specific period. Metric tons: A unit of mass equal to 1,000 kilograms. Greenfield refinery: A completely new refinery built on undeveloped land, without any existing structures. Petrochemical complex: An industrial site where raw materials are converted into various chemicals and products derived from petroleum and natural gas. Spot market: A market where financial instruments or commodities are traded for immediate delivery, at the current market price. Sanctions: Penalties or restrictions imposed by a government or international body on another country, entity, or individual.