Indian state refiners are considering tapping into the Middle East crude market as spot supply from their top supplier, Russia, have fallen, according to Reuters.
The three major state refiners, Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum, are facing a shortfall of 8-10 million barrels of Russian oil for January loading,
The refiners fear ongoing challenges in securing Russian oil in the spot market could continue in the coming months due to rising domestic demand in Russia and its commitments under the OPEC pact.
Reuters reported that companies might increase crude purchases from Middle East suppliers under optional volumes in term contracts or issue a spot tender for high-sulphur oil.
India has become the largest importer of Russian crude, following the EU imposition of sanctions on Russian oil imports in response to the 2022 invasion of Ukraine. Russian oil now accounts for more than a third of India’s energy imports.
Russia’s spot crude exports have declined since November as its refineries resumed operations post-maintenance and poor weather disrupted shipping activities, traders reported to Reuters.
Besides, Russia, an ally of the Organization of the Petroleum Exporting Countries, has pledged to make extra cuts to its oil output from the end of 2024 to compensate for overproduction earlier.
Moreover, most supplies from Russia’s state oil firm Rosneft are tied up in a deal with Indian private refiner Reliance Industries. This new deal accounts for roughly half of Rosneft’s seaborne oil exports from Russian ports, leaving little supply available for spot sales, according to Reuters.
India has no sanctions on Russian oil, allowing refiners to benefit from supplies made cheaper by penalties, which are at least $3 to $4 per barrel cheaper than rival grades.
According to Reuters, traders in the market are willing to supply Russian oil for payments in Chinese Yuan, but state refiners stopped paying for Russian oil in the Chinese currency after advice from the government last year.
