Russian oil deliveries to India have increased since the beginning of the year, and New Delhi looks set to buy even more cheap oil from Moscow.
They say that China is expected to buy more oil from Russia at deep discounts.
Higher crude prices could be on the way.
India and China are major oil consumers and have had to contend with higher crude prices. While oil prices have been volatile in recent weeks, they are still 80% higher than a year ago.
Matt Smith, lead oil analyst at Kpler, believes that China and India will step up to buy discounted Russian crude.
This would be a stark contrast to the rhetoric of major world powers and companies who are shunning Russian oil. The U.S. and the UK have imposed sanctions on Russia for its war on Ukraine. The European Union is also looking into it.
Russia is unable to sell excess crude because of sanctions, analysts said.
The Government of India’s motivations are economic, not political. India will always look for a deal in their oil import strategy.
The International Energy Agency said in March thatUrals crude from Russia is being offered at record discounts, but that it is limited to Asian oil buyers. The main oil blend that Russia exports is Urals crude.
3 million barrels a day of Russian oil supply could be shut in from April if restrictions or public condemnation escalate, according to the IEA.
Ellen Wald, president of Transversal consulting, told CNBC that a couple of commodity trading firms were offering discounts of $30 and $25 per barrel for the Urals blend two weeks ago.
Smith told CNBC that there were 12 million barrels of Russian crude delivered to India.
He hasn't seen any deliveries from Russia since December.
He told CNBC in an email that since the beginning of March, five Russian oil shipments have been loaded and are bound for India.
This is about half the volume discharged last year.
Markets have been roiled by fears of a tight oil supply as Russia supplies a significant amount of the world's oil and gas.
Russia oil is still finding a home. The discount to Brent continues to rise, and Indian refiners have issued several tenders for Urals crude.
According to the IEA, Russia exports about 5 million barrels of crude oil per day. It is the third largest oil producer after the US and Saudi Arabia.
Russia is the world's largest exporter of oil to global markets and the second largest crude oil exporter behind Saudi Arabia, according to the IEA.
According to analysts and some media reports, India could start buying more cheap oil from Russia at a discount. It would be more than $20 off each barrel based on current crude prices.
According to the head of trade at a consulting firm, India only imports 2% to 5% of its crude from Russia. He said that New Delhi gets its crude from Iraq, Saudi Arabia, the United Arab Emirates and Nigeria, but they are all making higher prices right now.
India will always look for a deal in their oil import strategy. It's hard not to take a 20% discount on crude when you import 80% of your oil, particularly in the midst of a global growth slowdown.
India would consider its friendship with Russia in taking crude off it.
India is the third biggest oil importer in the world and right now they are considering their options. India and China have so far abstained from a United Nations vote to condemn Russia's invasion of Ukraine.
Both countries have had a long history. Russia has supported India in a number of areas, including the provision of military and defense-related equipment, as much as 60% of the Asian country's needs. In the late 1950s, Russia was used to finance India's imports when the rupee-ruble currency swap arrangement was broke.
Russia supports India on important issues such as the dispute with China and Pakistan over the territory of Kashmir.
White House pressure to curb purchases of crude oil from Russia has fallen on deaf ears in Delhi.
India has taken on a tone of defiance. A government official said two weeks ago that countries with oil self-sufficiency or who import themselves from Russia cannot credibly advocate restrictive trading.
If Western countries were to pivot India's focus to consider how supporting Russia might embolden China, things could change.
Analysts think that China, the largest oil importer in the world, will buy discounted oil from Russia.
According to the IEA, the Asian giant bought an average of 1.6 million barrels of Russian oil per day in the year 2021.
China is still buying Russian oil, but would likely increase its purchases if it could pay in Chinese currency. Wald told CNBC in an email that Russia is being pressured because it is having difficulty selling its oil.
If they can buy Russian oil at a discount ... then I really don’t see what would be stopping China from purchasing a lot of Russian oil.
The prices of oil are too high for China and they would prefer cheaper oil.
The United States and the EU imposed sanctions on Iran's oil, but that didn't stop China from buying it.
Wald said that insurers hiked their premiums in the region after the Russia-Ukraine war started.
She said that an increase in China's purchases could affect oil prices.
I think that China will be able to get a good discount on Russian oil, so I would not be surprised if we see more Russian oil shifting to China.
Analysts didn't attribute the slight increase in China's purchases of Russian crude to the war.
China's flows to Russia are a bit better than last year, but this has more to do with China's appetite for ESPO crude from Eastern Russian ports. ESPO crude is popular with independent Chinese oil refineries.
Smith said that they are yet to see a change in the flows.
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