India, the world's third-largest oil consumer and importer, is witnessing significant shifts in its crude oil supply dynamics, driven by a combination of rising domestic demand, geopolitical factors, and economic considerations. While the country remains heavily reliant on imported oil to meet its energy needs, recent trends indicate a complex interplay between OPEC+ nations, Russia, and India in the global oil market.
India's energy consumption continues to rise, fueled by rapid economic expansion, increased manufacturing activity, urbanization, and expanding agricultural activities. The International Energy Agency (IEA) projects India's electricity demand to grow at an average of 6.3% annually over the next three years, outpacing the 5% average growth rate observed between 2015 and 2024. This surge in demand necessitates a robust and diversified energy supply, with oil playing a crucial role alongside renewable energy sources and other fuels.
OPEC's role in India's energy security remains vital, with OPEC countries supplying a significant portion of India's crude oil imports. These nations are key stakeholders in ensuring a stable and reliable flow of crude oil to meet India's growing energy needs. However, OPEC's market share in India has experienced fluctuations in recent years due to various factors.
In 2024, OPEC's share in India's crude oil imports edged up for the first time in nine years, reaching nearly 51.5%, compared to 49.6% in 2023. This increase was partly attributed to a decline in Russian oil supplies, prompting Indian refiners to increase their purchases of Middle Eastern grades. However, for the fiscal year ending March 2025, data revealed that the share of OPEC crude oil in India's imported oil fell to a new record low, as refiners continued to take advantage of cheaper Russian oil.
Russia has emerged as a major player in India's oil supply, becoming the top oil supplier to New Delhi for the third consecutive year. This shift was driven by Western sanctions imposed on Moscow due to the Ukraine conflict, which led to discounted Russian oil becoming an attractive option for Indian refiners. In the fiscal year ending March 2025, imports of Russian oil rose significantly, increasing its share to 36%, while OPEC's share slightly decreased to 48.5%.
Despite the increasing prominence of Russian oil, recent developments suggest a potential shift back towards OPEC+ suppliers. Washington's sanctions targeting Russian producers and tankers are expected to disrupt supplies from Russia to India and China, potentially tightening ship availability and impacting Russia's market share in India in 2025.
In response to these dynamics, Indian refiners have begun to diversify their crude oil sources, increasing purchases from Middle Eastern suppliers. This shift is reflected in December 2024 data, which showed Middle Eastern oil accounting for a 22-month high of about 52% of India's crude imports.
OPEC itself anticipates India's oil demand to grow at the fastest pace among major economies, doubling the rate of increase in China in 2025 and 2026. India's oil demand is projected to rise from 5.55 million barrels a day in 2024 to 5.74 million bpd in 2025, a 3.39% increase, further rising to 5.99 million bpd in 2026, growing at 4.28%. This growth is driven by rising energy needs in the world's fastest-growing economy, with diesel being the primary driver.
Several factors influence India's crude oil import strategy, including geopolitical tensions, cost considerations, and supply diversification efforts. While Russian oil has provided a cost-effective option, India remains committed to diversifying its energy sources and maintaining relationships with key OPEC+ producers. As the global oil market continues to evolve, India's approach to securing its energy needs will likely involve a combination of strategic partnerships, diversification efforts, and adaptability to changing market dynamics.
