India’s oil refiners are currently experiencing a robust supply of Russian crude in the global market, a situation largely attributed to recent geopolitical events.
Ukraine’s sustained attacks on Russia’s energy infrastructure have significantly curtailed Moscow’s domestic refining capacity, according to a Reuters report.
This reduction in refining capabilities has, in turn, diverted a greater volume of crude oil, originally intended for internal processing, into the international market.
Increased availability
This increased availability of Russian crude is proving advantageous for Indian refiners, who have become significant buyers of Russian oil since the imposition of Western sanctions following the invasion of Ukraine.
The discounted prices often associated with Russian oil, coupled with the ample supply, offer a compelling economic incentive for Indian companies.
This trend underscores the evolving dynamics of global energy markets and India’s strategic positioning within them, as the nation seeks to secure its energy needs amidst shifting international trade patterns.
The relationship between the US and India has faced considerable strain due to the former’s insistence that India cease its purchases of Russian oil.
This demand from US President Donald Trump was met with resistance from India, which refused to comply.
In response to India’s non-compliance, Washington escalated trade tensions by doubling tariffs on US imports from India, raising them to as much as 50%.
Purchases continue
India, on the other hand, has historically maintained a complex and strategic relationship with Russia, especially in the areas of defence and energy, making a complete cessation of oil imports a difficult proposition.
The imposition of increased tariffs by the US was a clear signal of its disapproval and an attempt to leverage economic pressure to achieve its desired outcome.
Unnamed officials stated to Reuters in the report that Indian refiners are continuing to purchase Russian oil.
India has emerged as the principal purchaser of Russian seaborne oil, a development that follows the imposition of sanctions on Moscow by several Western nations.
These sanctions and a general shunning of Russian energy products by many countries are a direct consequence of Russia’s invasion of Ukraine.
As a result, Russia has been offering its oil at a significant discount, making it an attractive option for countries like India and China looking to secure energy supplies.
Discounts narrowing
However, according to the report, discounts on Russian Urals crude for Indian deliveries have significantly decreased.
For November loading, the discount is now around $2-$2.50 per barrel below dated Brent.
This is a considerable reduction from the $20-$25 per barrel discount observed at the start of the war in February 2022, according to the report.
Russian oil refining has decreased by nearly a fifth on some days due to Ukrainian attacks on refineries and export pipelines.
This has also led to a reduction in exports from major ports, almost prompting Moscow to decrease its oil production.
In September, Russia experienced an increase in refinery outages compared to August, attributed to drone attacks from Ukraine.
Additionally, Indian refiners are considering increasing their purchases of oil and liquefied petroleum gas from the United States.
This decision hinges on the outcome of trade negotiations between New Delhi and Washington.
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