• Since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India – set to be discharged in early April, said Matt Smith, lead oil analyst at Kpler.
• "This is about half the entire volume discharged last year — a significant uptick," he told CNBC.
• If China also buys oil from Russia – also widely expected to be discounted – it could have some impact on crude prices, analysts said.
• "Urals crude from Russia is being offered at record discounts," the International Energy Agency said on March 17.

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.   

China, already the largest single buyer of Russian oil, is also widely expected to buy more oil from Russia at deep discounts, they say. 

This could mean higher crude prices to come.

Major oil importing countries such as India and China have been grappling with higher crude prices, which have soared since last year. While oil prices have been volatile in recent weeks, swinging between gains and losses, they are still around 80% higher compared to a year ago.

"We believe that China, and to a lesser extent, India will step up to buy heavily discounted Russian crude," said Matt Smith, lead oil analyst at Kpler.

This would mark a stark contrast from the rhetoric across major world powers and companies which are eschewing Russian oil. As a result of Russia's unprovoked and unjustified war on Ukraine, the U.S. has hit the rogue country with sanctions on energy, while the U.K. plans to do so by the end of the year. The European Union is also considering whether to do the same. 

But sanctions would leave a gap in the market with Russia finding itself with excess crude it's unable to sell, analysts said.

"Urals crude from Russia is being offered at record discounts, but uptake is limited so far, with Asian oil importers for the most part sticking to traditional suppliers in the Middle East, Latin America and Africa," the International Energy Agency said on March 17. Urals crude is the main oil blend that Russia exports.

"As of mid-March, we see the potential for 3 million barrels a day of Russian oil supply to be shut in starting from April, but that could increase if restrictions or public condemnation escalate," the IEA said.

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.

'Significant uptick' of Russian oil bound for India

Cargoes of Russian crude to India were "fairly infrequent," with 12 million barrels delivered across all of 2021, Smith told CNBC.

Kpler said he hasn't seen any deliveries to India from Russia since December.

However, since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India – set to be discharged in early April, he told CNBC in an email.

"This is about half the entire volume discharged last year — a significant uptick," Smith said. 

The Kremlin invaded Ukraine on Feb. 24, and since then, markets have been roiled by fears of tight oil supply as Russia supplies a significant amount of the world's oil and gas.

"Russia oil is still finding a home. Indian refiners have issued several tenders for Urals crude as the discount to Brent continues to rise," ANZ Research said Friday.

Russia exports about 5 million barrels of crude oil per day, according to the IEA. It is the world's third-largest oil producer after the U.S. and Saudi Arabia. 

Russia is also the world's largest exporter of oil to global markets and the second largest crude oil exporter behind Saudi Arabia, according to the IEA.

U.S.-India's close historical ties

India could start buying even more cheap oil from Russia at a discount of around 20%, according to analysts and some media reports. Based on current crude prices, that would represent more than $20 off each barrel.

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 always look for a deal in their oil import strategy. It's hard not to take a 20% discount on crude when you import 80-85% of your oil, particularly on the heels of the pandemic and global growth slowdown," Kapadia told CNBC in an email.

Beyond the benefit of discounts, India would also weigh its friendship with Russia in taking crude off it.

"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 vote to condemn Russia's invasion of Ukraine.

Both countries have had a long 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. In the late 1950s, India also leaned on Russia for rupee-ruble currency swap arrangements to finance its imports when the former was "broke," said Kapadia.

Russia has also supported India on crucial issues such as the dispute with China and Pakistan surrounding the territory of 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."

For its part, India has taken on a tone of defiance. "Countries with oil self-sufficiency or those importing themselves from Russia cannot credibly advocate restrictive trading," a government official said two weeks ago, according to Reuters.

"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.

No surprise if China buys more Russian oil

Analysts expect China, the largest oil importer in the world, to also go for discounted oil from Russia.

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 is still importing Russian oil, but would likely increase its purchases if it can pay in yuan and at discounts. Basically, Russia is pressured because it is having some difficulty selling its oil," Wald told CNBC in an 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."

A number of countries imposed sanctions on Iran's oil, starting with a U.S. and EU ban in 2011, because of its nuclear program, but that didn't stop China from buying oil from Iran via "all sort of clandestine means," she added.

"So I don't think they're really bothered by insurance issues and the like," said Wald, referring to insurers hiking their premiums on shipments in the region after the Russia-Ukraine war started, amid soaring risks of attacks on ships and ports.

She said an increase in China's purchases could hit oil prices.

"I would not be surprised if we do see more Russian oil shifting to China and then potentially other suppliers like Kuwait, UAE, even some Saudi oil shifting away, but the fact that that China will be able to get a good discount, I think will impact prices globally," she said.

China's purchases of Russian crude were slightly up this year, but analysts didn't attribute that to the 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 refers to Russian oil exports to Asia-Pacific markets, and is said to be popular with independent Chinese oil refineries.

"We are yet to see a change in these flows but expect it to emerge," Smith added.