India and China, the world's top oil users, continued to lap up heavily discounted Russian crude oil, buying as much as 80 per cent of the oil that Moscow exported in May, the International Energy Agency (IEA) said in a report.

"Heavily discounted Russian crude oil has found new buyers primarily in Asia. India has increased purchases from almost nothing to close to 2 million barrels per day, while China has raised liftings by 500,000 barrels per day to 2.2 million barrels per day," the Paris-based energy agency said in its latest Oil Market Report.

Russia-origin seaborne crude exports averaged 3.87 million barrels per day in May, the highest since Russia invaded Ukraine in February 2022.

"In May 2023, India and China accounted for almost 80 per cent of Russian crude oil exports," IEA said. "In turn, Russia made up 45 per cent and 20 per cent of crude imports in India and China, respectively.

With Russia's formerly main crude export markets in Europe banning import and G7 imposing shipping restrictions, more than 90 per cent of Russian seaborne crude is now headed to Asia, up from pre-war levels of 34 per cent.

India's imports of Russian oil were 14 per cent higher than in April and a fresh record high for Russian crude flows into the country.

The incentive to buy cheap Russian crude remains underpinned by deep discounts. Russia's main crude export grade Urals discount to Dated Brent averaged USD 26 per barrel in the first three weeks of May. This compared with USD 3.70 a barrel in January 2022.

IEA projected Indian GDP to grow by 4.8 per cent in 2023, rising to 6.3 per cent in 2024 before recovering to an even stronger 7 per cent in 2025-28.

"Growth will be buttressed by favourable demographics and an expanding middle class," it said. "India is set to overtake China in terms of global year-on-year oil demand growth in 2027.

The fastest-growing economy in the world, surpassed China to become the world's most populous country in 2023.

"Although its rate of expansion has been slowing for decades, population growth will likely not peak until 2065," IEA said. "Further propelled by trends such as urbanisation, industrialisation, and the emergence of a wealthier middle-class keen for mobility and tourism, Indian oil demand will grow by more than 1 million barrels per day between 2022 and 2028.

Diesel, the main fuel by far, will see its share of the product mix climb from 32 per cent to 35 per cent over the forecast period.

Since early 2023, increasing exports from India, the Middle East and China have moved west to European and G7 buyers in the Atlantic Basin to offset Russian cargoes now moving to buyers East of Suez (300,000 barrels per day or roughly one-third of Russian exports), IEA said.

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