What Happened
India expanded its crude sourcing to 31 countries during the six-month Iran war, but paradoxically, supply concentration increased sharply. Russia's share surged to 47%, leading to a 56% rise in the Herfindahl-Hirschman Index to 2,513, indicating high concentration.
Why It Matters (for you)
This shift highlights India's evolving energy security strategy, driven by geopolitical events and discounted crude availability. While diversification to more countries occurred, the heavy reliance on Russia introduces a new set of geopolitical and supply chain risks for India's energy sector.
Impact on Indian Markets
Indian refiners like RELIANCE, IOC, BPCL, and HPCL have benefited from discounted Russian crude, potentially improving their refining margins. However, the increased concentration also exposes them to greater risk if geopolitical dynamics with Russia change or if sanctions tighten. This could lead to volatility in their input costs.
What Traders Should Watch Next
Traders should closely monitor geopolitical developments concerning Russia and any potential changes in crude oil pricing dynamics. Watch for any policy shifts from the Indian government regarding crude sourcing and how Indian refiners adapt their procurement strategies to manage this concentration risk.
Key Evidence
- India expanded crude sourcing to 31 countries during the six-month Iran war.
- Supply concentration increased sharply.
- Russia’s share surged to 47%.
- Herfindahl-Hirschman Index rose 56% to 2,513, indicating high concentration.
- Nine of 10 new suppliers together contributed just 1.4% of imports.