A joint front of State-owned refiners is discussing crude oil purchase from Russia under a term deal that may be sealed in the next financial year (FY26), petroleum ministry sources said.
“The talks have been overtaken by a change in crude price. Now, the whole equation changes,” one of the sources said, indicating the deal may reach completion in FY26. Crude oil from Russia is usually purchased on spot prices, while long-term contracts are usually reserved for crude from India’s traditional import sources in the Middle East. Spot purchase allows refineries to secure different grades of oil, otherwise unavailable.
The deal will reduce the volatility in Russian crude prices and may allow India to have consistent access to Russian oil at lower rates. In May, Reliance Industries Limited (RIL) signed a one-year deal with Russia’s State-owned oil major Rosneft to buy at least 3 million barrels of oil per month in Russian rubles next year, Reuters had reported.
India is prepared to keep buying oil from Russian companies that are allowed to make such sales, since prices are cheaper, Petroleum and Natural Gas Minister Hardeep Singh Puri said earlier this week.
Russia has remained the largest source of crude for India for more than a year now. In August, oil imports from Russia stood at 1.8 million barrels per day (bpd), down 14.5 per cent from 1.49 million bpd in July, data from commodity market analytics firm Kpler showed.
Speaking about the term deals signed with Middle-Eastern nations last year, sources said these will be up for renewal talks later this year. India will be in a stronger position this year given it is the only major economy where oil demand is rising, the source indicated.
“The market has changed. Worldwide, estimates of global demand growth are being revised downwards. This means, in a country where demand is increasing…you can draw your own conclusions,” he said.
Above price cap
Sources also said Russian crude priced above $60 per barrel is currently being imported by Indian refiners, with Russian insurance cover.
In December 2022, G7 nations — the US, Canada, France, Germany, Italy, Japan, and the UK — have prohibited Western shipping and insurance companies from dealing in Russia crude sold at or above a $60 cap. This was implemented concurrently with a separate ban on Russian seaborne crude and refined shipments by the European Union (EU) nations.
In November 2023, the US Treasury Department sanctioned a number of maritime companies flouting the oil cap. The Western allies hope to financially squeeze out Moscow, which has continued to benefit from soaring energy prices, and cut off its means of financing the invasion of Ukraine. The average price of Urals crude grade had crossed the cap limit multiple times last year.
The average landed price of Russian crude in FY24 was $76.39 per barrel, as compared to $85.32 for oil imported from all other suppliers, media reports had pointed out in July.
First Published: Sep 19 2024 | 8:51 PM IS