As Moscow is offering deep discounts on its crude oil amid its boycott by the international community due to its invasion of Ukraine, India is looking at purchasing more low-cost Russian oil from Rosneft PJSC, according to a Bloomberg report. These deals, if closed, will be over and above the purchases India already made through other deals.
“State processors are collectively working on finalising and securing new six-month supply contracts for Russian crude to India… Cargoes are being sought on a delivered basis from Rosneft, with the seller set to handle shipping and insurance matters,” the report said quoting sources adding that details on volumes and pricing are still being negotiated with Indian banks set to fully finance all cargoes.
India imports over 80 per cent of its crude oil requirements. The country imported 193.5 million tonnes of crude oil in the current financial year till February, at a cost of $105.8 billion. The crude oil in the country mainly comes from the Middle East and the US. From Russia, in the whole year 2021, the country bought just 12 million barrels of the oil, which is only 2 per cent of its total imports. India’s own domestic production is more than that.
In April, External Affairs Minister S Jaishankar had said, “When oil prices go up, it’s natural for countries to look for good deals for their people… I’m pretty sure if we wait 2-3 months and look at the big buyers of Russian gas and oil, I suspect the list won’t be any different than what it used to be & we won’t be in the top-10.”
Russian oil arrivals into India for May were at 740,000 barrels a day, up from 284,000 barrels in April and 34,000 barrels a year earlier, according to data from Kpler.
The lower crude oil prices will be needed for India to keep the domestic petroleum prices under check that have already crossed Rs 100 per litre in Delhi and even more in some other states. The lower rate can keep inflation under control as costlier petroleum affects other commodities’ prices and, hence, room for the RBI to not raise interest rates.
The retail inflation in India stood at an eight-year high of 7.79 per cent, which is beyond the Reserve Bank of India’s (RBI) target limit.
The access to cheap crude is already boosting the country’s oil imports, which grew almost 16 per cent in April as compared to last year. The share of oil from the Eurasian region, which includes Russia, expanded to 10.6 per cent in April versus 3.3 per cent a year earlier, according to the Bloomberg report.
Brent Crude oil prices hit $120 a barrel on Monday after Saudi Arabia raised crude prices for July and amid doubts that an increased OPEC+ monthly output target will help ease tight supply. Russia offered as much as $35 per barrel discounts on the crude oil prices in April.