Russian oil: As international players avoid doing business with Moscow over the invasion of Ukraine, India is seeking to boost its oil imports from Russia. Its state-owned refineries are eager to take advantage of cheaper supplies from Rosneft PJSC.
According to people with knowledge of the firms’ procurement plans, state processors are focusing on finalizing and securing six-month supply contracts with Russian crude for India. There is a need for cargoes from Rosneft on a delivered basis, with shipping and insurance handled by the seller.
If these supply agreements are reached, they will be in addition to the existing deals under which India already purchases Russian goods. The customers who asked not to be identified as discussions are confidential are still negotiating details about volumes and pricing with the Indian banks that will fully finance all cargoes. The top international traders such as Glencore Plc will no longer deal with Indian refiners, they added, as the country increasingly procures directly from Russian companies such as Rosneft.
Private refiners include Reliance Industries, Hindustan Petroleum, and Bharat Petroleum, while state-owned refiners include Indian Oil Corp. and Hindustan Petroleum, which is partly owned by Rosneft. Private and state-owned companies handle their procurement separately. Contacted about the matter, no one from the three largest state-owned companies could immediately provide a comment.
Since US, UK, and European Union sanctions have caused most buyers to flee and offer levels to crash, both state-owned and private refineries in India have been purchasing Russian crude. As European buyers scrambled for alternatives, they even reached as far as the United Arab Emirates for alternative sources of crude oil. An unprecedented amount of Russian crude was heading to India and China last month. Since Russia invaded Ukraine in late February and the ensuing panic, global oil flows have been rerouted, driving oil prices up by more than 20%.
As Asia’s second-largest oil consumer, refiners in its second-largest market have enjoyed elevated profits from turning cheap crude into fuels for sale domestically in Asia and at export markets to Europe and the United States. India purchases both long-term and spot crude oil from the Middle East and Africa, along with Russian crude oil.
According to the people, a possible increase in Russian crude purchases could adversely affect South Asia’s spot imports. The Russian oil that India bought between late-February and early-May is about 20 percent more than what the country bought in 2021, according to Bloomberg calculations based on trade data. According to Kpler, the amount of Russian oil entering India for May jumped from 284,000 barrels in April and 34,000 barrels a year earlier.
However, India has been under pressure from the Biden administration and the EU to stop doing business with Moscow, in order to cut off Kremlin’s access to oil revenue and funds, despite its purchases of Russian crude not being illegal. Asian countries have repeatedly stressed that their imports of Russian goods are insignificant compared to European purchases, and represent a small fraction of their total consumption.
Despite inflation skyrocketing and prices increasing for everything from food to fuel, India has received some relief from the price decrease in Russian oil — which accounts for more than 85% of India’s oil imports. India already increased its oil imports 16% in April compared with last year as a result of cheap crude. Eurasian oil, which includes Russian oil, grew in April to 10.6% from 3.3% a year earlier, according to oil ministry data.