New Delhi, March 18 As India resists pressures from western countries to avoid purchasing crude oil from Russia, oil PSUs are queuing up for the discounted commodity. There are indications that supplies of around 8 million barrels may be booked by April-end, of which at least half is likely to be delivered in the next two-and-a-half months.
Government sources said India has to constantly explore competitive sources of energy. “With high volatility in the global market and oil breaking records, clearly we can’t be expected to watch from sidelines. We have to move considering our requirements, global prices, inflation, economy, etc,” sources said.
Oil PSUs lapping up cheap crude oil
Sources said that state-run refiners Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation (HPCL) have already contracted 3 million barrels and 2 million barrels, respectively of Russian crude oil, while Mangalore Refineries has floated a tender for one million barrels. Most supplies are being routed through traders.
Besides, more requirement is in advanced stages of discussions and tenders may soon be floated for additional 2 million barrels. While around four million barrels will be delivered by May-end, another 2 million barrels is expected in June-July 2022, they added.
A top government official said “Russian oil is being offered through traders in the spot market at deep discounts against Brent or Dubai markers, cheaper by up to $18-22 per barrel depending on factors such as Sokol or Ural grade, and trader, etc. It is mostly on CIF basis (seller pays freight and marine insurance). Oil imports from Iran were routed through this mechanism.”
India generally contracts Kazakh and Russian Ural crude oil on a free on board (FOB) basis. Most of the crude oil booked at present is Ural, which is a sulphur heavy grade, but supplies of the light sweet grade, Sokol may also be shipped, largely from the Russian far east region, he added.
“The discount makes it economically viable considering the long shipping route (more than 5,000 nautical miles) and the current freight costs. The discount of $18-22 per barrel can easily subsume $4-5 per barrel of shipping charges and still make it profitable to contract,” the official said.
Majority of the deliveries will be shipped through the Black sea port of Novorossiysk (for Ural grade). The official did not clarify on port from which the Sokol grade of Russian crude oil be shipped to India.
Additional Russian supplies in market
Analysts and officials said that Russian supplies hit by sanctions by the US and Europe are turning up in the market with traders offering them discount.
According to ICICI Securities, the financial sanctions on Russia, particularly the ban on using SWIFT for banking transactions, will have a negative impact on Russian oil supplies. China, Belarus and Hungary (which take about 40 per cent of Russia’s crude oil exports) are likely to continue buying Russian crude, with China buying more than usual, taking advantage of Russia’s discounted prices for oil. However, other European buyers will be seeking to diversify away from Russia.
“We maintain that about 3 million barrels per day (MMBD) (out of an annual average of 5.5 MMBD) of Russia’s crude oil exports will be partially disrupted. For gas supplies (70 per cent of which goes to Europe), mutual dependence will ensure that gas exports will continue – unless Russia chooses not to send gas to a customer as a retaliatory step,” it added.
India resists Western pressure
On Thursday, responding to media queries on India importing Russian oil, Ministry of External Affairs Spokesperson, Arindam Bagchi said ”Let me just highlight that a number of countries are doing so, especially in Europe, and for the moment, I will leave it at that.”
”We are a major oil importer and we are looking at all options at all points, we need the energy,” he added.