There’s been a “significant uptick” in Russian oil deliveries bound for India since March after Russia’s invasion of Ukraine began — and New Delhi looks set to buy even more cheap oil from Moscow, industry observers say.   

According to them, China is already the biggest single purchaser of Russian oil. 

This could translate into higher crude prices.

India and China, major oil importers, have struggled with rising crude prices since last year. Although oil prices fluctuated in recent weeks with swings between gains or losses, they remain around 80% higher than a year ago.

Matt Smith, Kpler’s lead oil analyst, stated that “We believe China and, to a lesser degree, India will buy highly discounted Russian crude.”

It would be a striking contrast to the statements made by major powers around the world and corporations that are abandoning Russian oil. The U.S. has imposed sanctions on Ukraine as a consequence of Russia’s war against Ukraine that was unprovoked. U.K. plans to do so by the end of the year. The European Union is currently considering whether they will do the same. 

Analysts said that sanctions could create a shortage in the market, with Russia unable to export excess crude oil.

The International Energy Agency stated that Urals crude oil from Russia was being sold at record prices, although uptake has been limited. Asian oil importers are sticking with traditional suppliers in Africa, Latin America, and the Middle East. Russia exports the Urals crude oil.

The IEA stated that as of March mid-March there was the possibility for Russian oil supplies to stop at 3 million barrels per day starting in April. However, this could rise if public or private condemnation increases.

A couple of commodity trading firms — such as Glencore and Vitol — were offering discounts of $30 and $25 per barrel respectively two weeks ago for the Urals blend, Ellen Wald, president of Transversal Consulting, told CNBC.

Russia exports about 5 million barrels of crude oil per dayThe IEA says it’s a 5%. According to the IEA, it is the world’s third-largest oil producer after the U.S. and Saudi Arabia. 

Russia is the largest oil exporter to the global market and second-largest crude oil exporter after Saudi Arabia. according to the IEA.

Analysts believe that India may begin to buy more oil cheaply from Russia, at around 20% discount. some media reports. Based on crude oil prices today, this would mean that each barrel will be worth more than $20

India imports crude from Russia only at a nominal share of between 2% to 5% a year, said Samir N. Kapadia, head of trade at government relations consulting firm Vogel Group. Traditionally, New Delhi gets its crude from Iraq, Saudi, Arabia, the United Arab Emirates and Nigeria – but they are all dictating higher prices right now, he said.

“Today, the Government of India’s motivations are economic, not political. India will never stop looking for deals in its oil import strategy. Kapadia said in an email to CNBC that it is difficult not to get a discount of 20% on crude oil when you are importing 80-85% or more of your oil. This was especially true after the global pandemic and slowdown in growth.

India, in addition to the discount and friendship it would have with Russia, will take crude off Russia’s oil.

“India is the third biggest oil importer in the world and right now, they are weighing their options to work with an old friend,” said Kapadia. India – as well as China – have so far abstained from a United Nations voteWe condemn Russia’s invading of Ukraine.

They have a rich history. Russia has supported India on a variety of areas including the provision of military and defense-related equipment — as much as 60% of the Asian country’s needs, according to Kapadia. According to Kapadia, India relied on Russia in the 1950s for the rupee-ruble exchange arrangements that it needed to finance imports.

Russia supported India also on critical issues, such as Pakistani and Chinese disputes over Kashmir.

“White House pressure to curb purchases of crude oil from Russia have fallen on deaf ears in Delhi,” said Kapadia. “The real question will be how the US and Europe respond to India should they extend an olive branch to Russia by providing them an outlet for their oil.”

India for its part is displaying defiance. Two weeks ago, a senior government official told Reuters that Russia can’t credibly promote restrictive trading. “Countries with oil independence or countries importing from Russia themselves cannot credibly advocate restrictive trading.”

“If Western countries were to pivot India’s focus to consider how supporting Russia might embolden China’s geopolitical influence in the region, things could shift,” Kapadia added.

The Asian giant is already the largest single buyer of Russian oil, and bought an average of 1.6 million barrels per day of Russian crude in 2021, according to the IEA.

China imports Russian oil. However, it would increase its purchase if it could pay in yuan or at discounted prices. “Russia is under pressure because it has some difficulties selling its oil,” Wald explained to CNBC via email.

“China really would prefer much cheaper oil … prices are way too high even in the $90 range that’s too high for China,” she added. “If they can buy Russian oil at a discount, and some of these discounts are pretty significant — $30 off the benchmark, then I really don’t see what would be stopping China from purchasing a lot of Russian oil.”

Numerous countries placed sanctions against Iran’s oil. starting with a U.S. and EU ban in 2011China bought oil from Iran through “all sorts of clandestine methods”, she said.

Wald stated, “So they don’t seem to be really bothered with insurance issues and other such things.” insurers hiking their premiumsAfter the Russia-Ukraine conflict, there were high risks of attack on ports and ships.

She suggested that an increase of Chinese purchases might impact oil prices.

“I wouldn’t be surprised to see more Russian oil being moved to China. Then, there might be other suppliers like Kuwait and UAE. Some Saudi oil could also be shifting away. But the fact that China can get a great discount I believe will have an impact on global prices,” she stated.

Although China bought slightly more Russian crude oil this year than usual, analysts did not attribute the increase to war.

“China’s flows to Russia are a bit firmer than last year’s pace, but this has more to do with China’s appetite for ESPO crude from Eastern Russian ports — it doesn’t relate to Russian crude being diverted away from Europe,” Kpler’s Smith said. ESPO crude, which refers to Russian oil exports from Asia-Pacific markets and is popular among independent Chinese oil refineries.

Smith said, “We have yet to witness a change in these flow patterns but we expect it to occur,” Smith agreed.